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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
 
FORM
10-K
 
(Mark
One)
 


☒
ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

 
For
the fiscal year ended March 31, 2024
 
OR

 


☐
TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO 

 
Commission
File Number 001-15697
 
Elite
Pharmaceuticals, Inc.
(Exact
name of Registrant as specified in its Charter)
 


Nevada
 
22-3542636

(State
                                            or other jurisdiction of
incorporation
    or organization)
 
(I.R.S.
                                            Employer
Identification
    No.)

 
 
 

165
                                            Ludlow Avenue
Northvale,
    New Jersey
 
07647

(Address
    of principal executive offices)
 
(Zip
    Code)

 
Registrant’s
telephone number, including area code: (201) 750-2646
 
 
Securities
registered pursuant to Section 12(b) of the Act:
 


Title
    of each class
 
Trading
                                                                                                       Symbol(s)
 
Name
    of each exchange on which registered

Common
    Stock, par value $0.001 per share
 
ELTP
 
OTCQB

 
Securities
registered pursuant to Section 12(g) of the Act: None
 
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
 
Indicate
by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
 
Indicate
by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
 
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit such files). YES ☒ NO ☐
 
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 


Large
    accelerated filer
☐
Accelerated
    filer
☐

 
 
 
 

Non-accelerated
    filer
☒
Smaller
    reporting company
☒

 
 
 
 

Emerging
    growth company
☐
 
 

 
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
 
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☒
 
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
 
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
 
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price
of the shares of common stock on the last business day of the registrant’s most recently competed second fiscal quarter, was approximately
$95,105,235, based on the last sales price reported for such date on the OTCQB Venture Market.
 
The
number of shares outstanding of each of the registrant’s classes of common stock, as of June 26, 2024:
 
Common
Stock - 1,068,273,108 shares
 

 
 

 
 

 
FORWARD
LOOKING STATEMENTS
 
This
Annual Report on Form 10-K and the documents incorporated herein contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in
this report, statements that are not statements of current or historical fact are forward-looking statements, and include, without limitation,
estimated future results of operations, estimates of future revenues, future expenses, future net income and future net income per share,
as well as statements regarding future financing activities, changes in consumer spending, decisions to engage in certain medical procedures,
future governmental orders that could impact our operations and the ability of our manufacturing facilities and suppliers to fulfill
their obligations to us, and any other statements that refer to our expected, estimated or anticipated future results. Without limiting
the foregoing, the words “plan”, “intend”, “may,” “will,” “expect,” “believe”,
“could,” “would”, “continue”, “pursue”, “anticipate,” “estimate,”
“forecast”, “contemplate”, “envisage”, “project”, or “continue” or the negative
other variations thereof, or similar expressions or other variations or comparable terminology are intended to identify such forward-looking
statements. All statements other than statements of historical fact included in this report regarding our financial position, business
strategy and plans or objectives for future operations are forward-looking statements. Without limiting the broader description of forward-looking
statements above, we specifically note, without limitation, that statements regarding the preliminary nature of the clinical program
results and the potential for further product development, that involve known and unknown risks, delays, uncertainties and other factors
not under our control, the requirement of substantial future testing, clinical trials, regulatory reviews and approvals by the Food and
Drug Administration and other regulatory authorities prior and subsequent to the commercialization of products under development and
those currently related to commercial operations, our ability to fund all of our activities and our ability to manufacture and sell any
products, gain market acceptance earn a profit from sales or licenses of any drugs or our ability to discover new drugs in the future
are all forward-looking in nature.
 
We
do not undertake any obligation to update our forward-looking statements after the date of this document for any reason, even if new
information becomes available or other events occur in the future, except as may be required under applicable securities law. You are
advised to consult any further disclosures we make on related subjects in our reports filed with the Securities and Exchange Commission
(the “SEC”). Also, please note that in Part 1, Item 1A, we provide a cautionary discussion of the risks, uncertainties and
possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we think could cause
our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section
27A of the Securities Act and Section 27E of the Exchange Act. You are notified and should understand that it is not possible to predict
or identify all such factors and consequently should not consider this to be a complete, all-inclusive discussion of all potential risks
or uncertainties.
 

 
 

 
Table
of Contents
 


 
 
PAGE

PART I
 
1

 
 
 

ITEM
    1
BUSINESS
1

 
 
 

ITEM
    1A
RISK FACTORS
16

 
 
 

ITEM
    1B
UNRESOLVED STAFF COMMENTS
43

 
 
 

ITEM
    1C
CYBERSECURITY
43

 
 
 

ITEM
    2
PROPERTIES
44

 
 
 

ITEM
    3
LEGAL PROCEEDINGS
44

 
 
 

ITEM
    4
MINE SAFETY DISCLOSURES
44

 
 
 

PART II
 
45

 
 
 

ITEM
    5
MARKET FOR COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
45

 
 
 

ITEM
    6
RESERVED
47

 
 
 

ITEM
    7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
48

 
 
 

ITEM
    7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
56

 
 
 

ITEM
    8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
56

 
 
 

ITEM
    9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
56

 
 
 

ITEM
    9A
CONTROLS AND PROCEDURES
57

 
 
 

ITEM
    9B
OTHER INFORMATION
58

 
 
 

ITEM
    9C
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
58

 
 
 

PART III
 
59

 
 
 

ITEM
    10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
59

 
 
 

ITEM
    11
EXECUTIVE COMPENSATION
62

 
 
 

ITEM
    12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
67

 
 
 

ITEM
    13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
68

 
 
 

ITEM
    14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
68

 
 
 

PART IV
 
69

 
 
 

ITEM
    15
EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
69

 
 
 

ITEM
    16
FORM 10-K SUMMARY
72

 
 
 

SIGNATURES
73

 

 i 
 

 
PART
I
 
ITEM
1. BUSINESS
 
General
 
Elite
Pharmaceuticals, Inc., a Nevada corporation (the “Company”, “Elite”, “Elite Pharmaceuticals”, the
“registrant”, “we”, “us” or “our”) was incorporated on October 1, 1997 under the laws
of the State of Delaware, and its wholly-owned subsidiary, Elite Laboratories, Inc. (“Elite Labs”), was incorporated on August
23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the
State of Nevada.
 
We
are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, and
the manufacture of generic pharmaceuticals. Our strategy includes developing generic versions of controlled-release drug products with
high barriers to entry.
 
We
occupy manufacturing, warehouse, laboratory and office space at 135, 144 and 165 Ludlow Avenue in Northvale, NJ (the “Northvale
Facility”). The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”) and is a United States
Drug Enforcement Agency (“DEA”) registered facility for research, development, and manufacturing. Our website address is
www.elitepharma.com.
 
Strategy
 
We
focus our efforts on the following areas: (i) manufacturing of a line of generic pharmaceutical products with approved Abbreviated New
Drug Applications (“ANDAs”); (ii) development of additional generic pharmaceutical products; (iii) development of the other
product candidates in our pipeline including products co-developed with partners; (iv) commercial exploitation of our product candidates
either by sales under our own label, license and the collection of royalties, or through the manufacture of our formulations; and (v)
development of new products for sale under our own label, and the expansion of our licensing agreements with other pharmaceutical companies,
including co-development projects, joint ventures and other collaborations.
 
We
continue to evaluate opportunities for the development of various types of drug products, including branded drug products which require
New Drug Applications (“NDAs”) under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration
Act of 1984 (the “Drug Price Competition Act”) as well as generic drug products which require ANDAs.
 
We
believe that our business strategy enables us to reduce its risk by having a diverse product portfolio.
 

 1 
 

 
Commercial
Products
 
We
own, license, manufacture, sell, distribute or receive royalties from the following products currently being sold commercially:
 


Product 
Branded
Product
Equivalent 
Therapeutic
Category 
Launch Date

Phentermine HCl 37.5mg tablets (“Phentermine 37.5mg”) 
Adipex-P® 
Bariatric 
April 2011

Phendimetrazine Tartrate 35mg tablets (“Phendimetrazine 35mg”) 
Bontril® 
Bariatric 
November 2012

Phentermine HCl 15mg and 30mg capsules (“Phentermine 15mg” and “Phentermine 30mg”) 
Adipex-P® 
Bariatric 
April 2013

Naltrexone HCl 50mg tablets (“Naltrexone 50mg”) 
Revia® 
Pain 
September 2013

Isradipine 2.5mg and 5mg capsules (“Isradipine 2.5mg” and “Isradipine 5mg”) 
N/A 
Cardiovascular 
January 2015

Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”) 
Surmontil® 
Antidepressant 
May 2017

Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”) 
Adderall® 
Central Nervous System (“CNS”) Stimulant 
April 2019

Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”) 
Dantrium® 
Muscle Relaxant 
June 2019

Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”) 
Adderall XR® 
Central Nervous System (“CNS”) Stimulant 
March 2020

Loxapine Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”, and Loxapine 50mg”) 
Loxapine® 
Antipsychotic 
May 2021

Vigabatrin Powder 500mg (“Vigabatrin 500mg”) 
Sabril® 
Anti-epileptic 
January 2024

 
Note:
Phentermine 37.5mg is also referred to as “Phentermine Tablets”. Phentermine 15mg and Phentermine 30mg are collectively and
individually referred to as “Phentermine Capsules”. Phendimetrazine 35mg is also referred to as “Phendimetrazine Tablets”.
Naltrexone 50mg is also referred to as “Naltrexone Tablets”. Isradipine 2.5mg and Isradipine 5mg are collectively and individually
referred to as “Isradipine Capsules”. Trimipramine 25mg, Trimipramine 50mg, and Trimipramine 100mg are collectively and individually
referred to as “Trimipramine Capsules”. Amphetamine IR 5mg, Amphetamine IR 7.5mg, Amphetamine IR 10mg, Amphetamine IR 12.5mg,
Amphetamine IR 15mg, Amphetamine IR 20mg and Amphetamine IR 30mg are collectively and individually referred to as “Amphetamine
IR Tablets”. Dantrolene 25mg, Dantrolene 50mg and Dantrolene 100mg are collectively and individually referred to as “Dantrolene
Capsules”. Amphetamine ER 5mg, Amphetamine ER 10mg, Amphetamine ER 15mg. Amphetamine ER 20mg, Amphetamine ER 25mg and Amphetamine
ER 30mg are collectively and individually referred to as “Amphetamine ER Capsules”. Loxapine 5gm, Loxapine 10mg, Loxapine
25mg and Loxapine 50mg are collectively and individually referred to as “Loxapine Capsules”, Vigabatrin 500mg is collectively
and individually referred to as “Vigabatrin Powder”.
 
Phentermine
37.5mg
 
The
Company acquired two ANDA’s for Phentermine 37.5mg, in 2010 and 2013, respectively.
 
Sales
and marketing rights for Phentermine 37.5mg relating to the approved ANDA acquired in 2010 are included in the licensing agreement between
the Company and Precision Dose Inc. (“Precision Dose”) dated September 10, 2010 (the “Precision Dose License Agreement”).
Please see the section below titled “Precision Dose License Agreement” for further details of this agreement. This product
is currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement.
 

 2 
 

 
The
Phentermine 37.5mg product relating to the approved ANDA acquired in 2013 is currently a commercial product being manufactured at the
Northvale Facility and distributed by Elite Labs.
 
Phendimetrazine
Tartrate 35mg
 
The
ANDA for Phendimetrazine was acquired by Elite in 2013.
 
Phendimetrazine
35mg is currently a commercial product being manufactured at the Northvale Facility and distributed by Elite Labs.
 
Phentermine
15mg and Phentermine 30mg
 
Phentermine
15mg capsules and Phentermine 30mg capsules were developed by the Company, with Elite receiving approval from the United States Food
and Drug Administration (“FDA”) of the related ANDA in September 2012.
 
Sales
and marketing rights for Phentermine 15mg and Phentermine 30mg are included in the Precision Dose License Agreement. Please see the section
below titled “Precision Dose License Agreement” for further details of this agreement.
 
Phentermine
15mg and Phentermine 30mg are currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement.
 
Naltrexone
50mg
 
The
ANDA for Naltrexone 50mg was acquired by Elite in 2010.
 
Sales
and marketing rights for Naltrexone 50mg are included in the Precision Dose License Agreement. Please see the section below titled “Precision
Dose License Agreement” for further details of this agreement. Naltrexone 50mg is currently being manufactured by Elite and
distributed by TAGI under the Precision Dose License Agreement.
 
Isradipine
2.5mg and Isradipine 5mg
 
The
approved ANDAs for Isradipine 2.5mg and Isradipine 5mg were acquired by Elite in 2013
 
Isradipine
2.5mg and Isradipine 5mg are commercial products being manufactured by Elite at the Northvale Facility and distributed by Elite Labs.
 
Trimipramine
25mg, Trimipramine 50mg and Trimipramine 100mg
 
The
approved ANDA for Trimipramine was acquired by Elite in 2017.
 
Trimipramine
25mg, Trimipramine 50mg and Trimipramine 100mg are a commercial product being manufactured by Elite at the Northvale Facility and distributed
by Elite Labs.
 
Amphetamine
IR Tablets
 
On
December 10, 2018, the Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall®, an immediate-release
mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine
Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets. The product is a central nervous system stimulant
and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy.
 
Amphetamine
IR Tablets are currently a commercial product being manufactured by Elite and distributed by Elite Labs.
 
Amphetamine
ER Capsules
 
On
December 12, 2019, the Company received approval from the FDA for Amphetamine ER Capsules, a generic version of Adderall XR®, an
extended-release mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine
Sulfate, Amphetamine Sulfate) with strengths of 5mg, 10mg, 15mg, 20mg, 25mg, and 30 mg tablets. The product is a central nervous system
stimulant and is indicated for the treatment of ADHD and Narcolepsy.
 
Amphetamine
ER Capsules are currently a commercial product being manufactured by Elite at the Northvale Facility and distributed by Elite Labs as
well as being manufactured by Elite at the Northvale Facility and distributed by Prasco, LLC (“Prasco”) pursuant to the non-exclusive
license agreement between the Company and Prasco dated April 5, 2023 (the “Prasco Non-Exclusive License Agreement”).
 

 3 
 

 
Dantrolene
Capsules
 
The
approved ANDAs for Dantrolene 25mg, Dantrolene 50mg and Dantrolene 100mg were acquired by Elite in 2013. Dantrolene Capsules are a commercial
product being manufactured by Elite at the Northvale Facility and distributed by Elite Labs.
 
Loxapine
Capsules
 
The
approved ANDA for Loxapine was acquired by Elite in 2013.
 
Loxapine
Succinate 5, 10, 25 and 50 mg are commercial products being manufactured by Elite at the Northvale Facility and distributed by Elite
Labs
 
Vigabatrin
Powder
 
On
June 29, 2022 the Company received approval from the FDA for Vigabatrin powder. The product is in the anti-epileptic therapeutic category.
Pursuant to the asset purchase agreement between the Company and Pyros Pharmaceuticals Inc. (“Pyros”) dated November 21,
2022 (the “Pyros Asset Purchase Agreement”), the Company sold to Pyros its rights in and to the Company’s approved
ANDA for Vigabatrin Powder.
 
On
November 21, 2022, the Company entered into a Manufacturing and Supply Agreement with Pyros (the “Pyros Manufacturing and Supply
Agreement”), pursuant to which the Company manufactures and supplies to Pyros Vigabatrin Powder at an agreed upon price over a
term of three years.
 
Vigabatrin
Powder is currently being manufactured by Elite at the Northvale Facility and commercially launched and marketed by Pyros since January
2024.
 
Products
Under FDA Review
 
SequestOx™
- Immediate Release Oxycodone with sequestered Naltrexone
 
SequestOx™
is our abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate. SequestOx™
is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone which incorporates 5mg, 10mg, 15mg, 20mg and 30mg doses
of oxycodone into capsules.
 
In
January 2016, the Company submitted a 505(b)(2) New Drug Application for SequestOx™, after receiving a waiver of the $2.3 million
filing fee from the FDA. In March 2016, the Company received notification of the FDA’s acceptance of this filing and that such
filing has been granted priority review by the FDA with a target action under the Prescription Drug User Fee Act (“PDUFA”)
of July 14, 2016.
 
On
July 15, 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review cycle for the SequestOx™
NDA is complete and the application is not ready for approval in its present form.
 
On
July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for or SequestOx™. The mean Tmax (the
amount of time that a drug is present at the maximum concentration in serum) of SequestOx™ was 4.6 hr. with a range of 0.5 hr.
to 12 hr. and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr. with a range of 0.5 hr. to 12 hr. A key objective for the
study was to determine if the reformulated SequestOx™ had a similar Tmax to the comparator when taken with a high fat meal. Based
on these results, the Company paused clinical trials for this formulation of SequestOx™. On January 30, 2018, the Company reported
positive topline results from a pilot study conducted for a modified SequestOx™ wherein, based on the results of this pilot study,
the modified SequestOx™ formulation is expected to achieve bioequivalence with a Tmax range equivalent to the reference product
when conducted in a pivotal trial under fed conditions. The Company has provided the pilot data to the FDA, requesting clarification
as to the requirements for resubmission of the NDA. The FDA has provided guidance for repeated bio-equivalence studies in order to bridge
the new formulation to the original SequestOx™ studies and also extended our filing fee waiver until July 2023. Due to the prohibitive
cost of such repeated bio-equivalence studies and the uncertain commercial viability given the regulatory and competitive landscape,
the Company has paused development of this product candidate.
 
There
can be no assurances of the Company conducting future clinical trials, or if such trials are conducted, there can be no assurances of
the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future resubmission
of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA. In addition, even if marketing authorization
is received, there can be no assurances that there will be future revenues or profits, or that any such future revenues or profits would
be in amounts that provide adequate return on the significant investments made to secure this marketing authorization.
 

 4 
 

 
Generic
Products Filed
 
Currently
the Company has filed the following ANDA’s which have been accepted for review by the FDA:
 


 
●
Generic
    dopamine agonist accepted for review in December 2022

 
●
Generic
    antimetabolite accepted for review in April 2023

 
●
Generic
    opiate analgesic for pain management accepted for review in September 2023

 
●
Generic
    central nervous system stimulant accepted for review in December 2023

 
Approved
Products Not Yet Commercialized
 
Acetaminophen
and Codeine Phosphate
 
The
Company received approval on September 10, 2019 from the FDA of an ANDA for a generic version of Tylenol® with Codeine (acetaminophen
and codeine phosphate) 300mg/7.5mg, 300mg/15mg, 300mg/30mg and 300mg/60mg tablets. Acetaminophen with codeine is a combination medication
indicated for the management of mild to moderate pain, where treatment with an opioid is appropriate and for which alternative treatments
are inadequate. The Company is currently assessing commercialization options for this product.
 
Doxycycline
Hyclate Tablets
 
The
Company received approval in April 2022 from the FDA of an ANDA for a generic version of an antibiotic product. The product is jointly owned by Elite and Praxgen Pharmaceuticals LLC, formerly
SunGen Pharma LLC, (“Praxgen”).
 
Methotrexate
Sodium Tablets
 
On
May 10, 2024, the Company received approval from the FDA for an ANDA for generic Methotrexate Sodium 2.5 mg tablets. Methotrexate belongs
to a class of drugs known as antimetabolites and will be sold under the Elite Laboratories, Inc. label.
 
Hydrocodone
Bitartrate and Acetaminophen Tablets
 
On
June 17, 2024, the Company entered into an asset purchase agreement with Nostrum Laboratories Inc. (the “Nostrum Asset Purchase
Agreement”), pursuant to which the Company acquired all rights in and to the approved ANDA to this product and a royalty-free,
non-exclusive perpetual license to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods,
know-how and improvements necessary or used to manufacture this product.
 
Oxycodone
Hydrochloride and Acetaminophen Tablets
 
On
June 17, 2024, the Company entered into an asset purchase agreement with Nostrum Laboratories Inc. (the “Nostrum Asset Purchase
Agreement”), pursuant to which the Company acquired all rights in and to the approved ANDA to this product and a royalty-free,
non-exclusive perpetual license to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods,
know-how and improvements necessary or used to manufacture this product.
 
Methadone
Hydrochloride Tablets
 
On
June 17, 2024, the Company entered into an asset purchase agreement with Nostrum Laboratories Inc. (the “Nostrum Asset Purchase
Agreement”), pursuant to which the Company acquired all rights in and to the approved ANDA to this product and a royalty-free,
non-exclusive perpetual license to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods,
know-how and improvements necessary or used to manufacture this product.
 
There
can be no assurances in relation to any of the above approved products not yet commercialized, that there will be future revenues of
profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments
made to secure these marketing authorizations.
 
Discontinued
and Transferred Products
 
As
part of standard operating practices, the Company, from time to time, as relevant, conducts evaluations of all ANDAs owned, consisting,
without limitation, of ANDAs acquired or approved prior to the fiscal year ended March 31, 2024 (“Fiscal 2024”) and ANDAs
acquired or approved during the Fiscal 2023. Such evaluations include, without limitation, costs and benefits relating to each ANDA owned,
with such costs including those fees required under the FDA’s Generic Drug User Fee Amendment which is significantly influenced
by the number of ANDAs owned, and other costs and benefits taking into consideration various specific market factors for each ANDA. Those
ANDAs with a cost/benefit profile not consistent with management criteria for continuation are identified for disposition and effort
is made to determine the optimal course of action to achieve disposition of the ANDA.
 
The
Company did not transfer or discontinue any ANDAs during Fiscal 2023 or Fiscal 2024.
 

 5 
 

 
Licensing,
Manufacturing and Development Agreements
 
Precision
Dose License Agreement
 
On
September 10, 2010, the Company executed a License Agreement with Precision Dose (the “Precision Dose License Agreement”)
to market and distribute Phentermine 37.5mg, Phentermine 15mg, Phentermine 30mg, Hydromorphone 8mg, Naltrexone 50mg, and certain additional
products that require approval from the FDA, through its wholly-owned subsidiary, TAGI, in the United States, Puerto Rico and Canada.
Phentermine 37.5mg was launched in April 2011. Hydromorphone 8mg was launched in March 2012. Phentermine 15mg and Phentermine 30mg were
launched in April 2013. Naltrexone 50mg was launched in September 2013. Precision Dose will have the exclusive right to market these
products in the United States and Puerto Rico and a non-exclusive right to market the products in Canada.
 
Pursuant
to the Precision Dose License Agreement, Elite will receive a license fee and milestone payments. The license fee will be computed as
a percentage of the gross profit, as defined in the Precision Dose License Agreement, earned by Precision Dose as a result of sales of
the products. The license fee is payable monthly for the term of the Precision Dose License Agreement. The milestone payments will be
paid in six installments. The first installment was paid upon execution of the Precision Dose License Agreement. The remaining installments
are to be paid upon FDA approval and initial shipment of the products to Precision Dose. The term of the Precision Dose License Agreement
is 15 years and may be extended for 3 successive terms, each of 5 years.
 
Marketing
License with Epic Pharma LLC
 
On
November 21, 2020 we entered into a license, manufacturing and supply agreement with Epic Pharma LLC to market the two Elite generic
products described below in the United States.
 
Beginning
on May 23, 2021 and continuing until the agreement terminates, Epic has exclusive marketing rights to Trimipramine Capsules and Isradipine
Capsules. The products are manufactured by Elite for Epic on a cost-plus basis. In addition to the purchase prices for the products,
Elite also receives license fees of 50% of gross profits or greater, with such being defined as net sales less the price paid to Elite
for the products, distribution fees of less than 10% and shipping costs. This license was terminated as of March 31, 2023.
 
Prasco-Burel
Loxapine License Agreement
 
On
February 14, 2020, and as amended on July 30, 2020, the Company entered into a license, manufacturing and supply agreement with Prasco,
LLC and its affiliate Burel Pharmaceuticals, Inc. (“Burel”) to market generic Loxapine Succinate capsules in the United States.
Burel sales for the product began in May 2021.
 
Under
the agreement, Burel has exclusive marketing rights to Loxapine. The product is manufactured by Elite, and the Company receives manufacturing
fees and license fees of 50% of gross profits or greater, with such being defined as net sales less the price paid to Elite for the products,
distribution fees of less than 10% and shipping costs. This agreement was terminated as of March 31, 2023.
 
Prasco
Non-Exclusive License Agreement
 
On
April 5, 2023, the Company entered into a non-exclusive license agreement to manufacture, supply and distribute with Prasco, LLC and
its affiliate Burel to distribute generic mixed amphetamine extended-release capsules in the United States. The term of the agreement
is two years from January 1, 2024. First commercial sale by Prasco of this product was April 5, 2024.
 
Strategic
Marketing Alliances with Lannett Company Inc.
 
The
Company has entered into two separate license, supply and distribution agreements with Lannett Company Inc. (“Lannett”).
The first agreement, dated March 6, 2019, relates to products that were co-developed with Praxgen (the “Lannett-Praxgen Product
Alliance”). The second agreement, dated April 9, 2019, relates to products that were solely developed by Elite (the “Lannett-Elite
Product Alliance”). Both agreements are collectively and individually referred to as the “Lannett Alliance”).
 
Pursuant
to Lannett-Praxgen Product Alliance with Lannett, Lannett will be the exclusive U.S. distributor for Amphetamine IR Tablets and Amphetamine
ER Capsules. Elite manufactures these products, which are purchased, marketed and distributed by Lannett under the Lannett label. In
addition to the purchase prices for the products, Elite will receive license fees well in excess of 50% of net profits, which will be
shared equally with Praxgen, pursuant to the Praxgen Agreement. Net profits are defined as net sales less the price paid to Elite for
the products, distribution fees (less than 10%) and shipping costs. The Lannett-Praxgen Product Alliance has an initial term of three
years and automatically renews for one year periods absent prior written notice of non-renewal. In addition to customary termination
provisions, the Agreement permits Lannett to terminate with regard to a product on at least three months’ prior written notice
if it determines to stop marketing and selling such product, and it permits Elite to terminate with regard to a product if at any time
after the first twelve months from the first commercial sale, the average license fee paid by Lannett for such product is less than $100,000
for a six month sales period. In addition to manufacturing fees and license fees, Lannett also paid a $750,000 milestone, upon the March
2020 commercial launch of Amphetamine ER Capsules. This milestone payment was earned during March 2020 and was shared equally by Elite
and Praxgen, pursuant to the Praxgen Agreement.
 

 6 
 

 
Pursuant
to the Lannett-Elite Product Alliance, Elite manufactures for Lannett’s purchase, marketing, and distribution of Dantrolene Capsules
under the Lannett label. In addition to the purchase prices for the products, Elite will receive license fees well in excess of 50% of
gross profits. Gross profits are defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%)
and shipping costs. Lannett will have exclusive marketing rights to Dantrolene Capsules. The Lannett-Elite Product Alliance has an initial
term of three years and automatically renews for one year periods absent prior written notice of non-renewal. In addition to customary
termination provisions, the Agreement permits Lannett to terminate with regard to a product on at least three months’ prior written
notice if it determines to stop marketing and selling such product, and it permits Elite to terminate with regard to a product if at
any time after the first twelve months from the first commercial sale, the average license fee paid by Lannett for such product is less
than $100,000 for a six month sales period. In addition to manufacturing fees and license fees.
 
Please
also note that in May 2020, Praxgen, under an asset purchase agreement, assigned its rights and obligations under the Praxgen Agreement
for Amphetamine IR and Amphetamine ER to Mikah. The ANDAs for Amphetamine IR and Amphetamine ER are now registered under Elite’s
name. Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will assume all the rights and obligations for
these products from Praxgen.
 
All
agreements with Lannett were terminated as of March 31, 2023.
 
Pyros
Asset Purchase Agreement
 
On
November 21, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc. (“Pyros”) pursuant to which the
Company sold to Pyros its rights in and to the Company’s approved ANDA for its generic Sabril drug. The Company sold its rights
to Pyros for $1,000,000, which was recorded as gain on sale of ANDA during the year ended March 31, 2023. There is no further action
required by the Company regarding the rights which would affect future periods.
 
Pyros
Manufacturing and Supply Agreement
 
In
conjunction with the sale of its Product to Pyros, the Company executed a Manufacturing and Supply Agreement (the “Pyros Agreement”)
with Pyros. Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the manufacturing and
packaging of Sabril over a term of three years. Revenue per the Pyros Agreement will be recognized as control of the manufactured and
supplied drugs is transferred to Pyros (at the time of delivery).
 
Products
Under Development
 
Elite’s
research and development activities include developing its proprietary abuse deterrent technology and the development of a range of abuse
deterrent opioid products that utilize this technology or other approaches to abuse deterrence.
 
Elite’s
proprietary abuse-deterrent technology utilizes the pharmacological approach to abuse deterrence and consists of a multi-particulate
capsule which contains an opioid agonist in addition to naltrexone, an opioid antagonist used primarily in the management of alcohol
dependence and opioid dependence. When this product is taken as intended, the naltrexone is designed to pass through the body unreleased
while the opioid agonist releases over time providing therapeutic pain relief for which it is prescribed. If the multi-particulate beads
are crushed or dissolved, the opioid antagonist, naltrexone, is designed to release. The absorption of the naltrexone is intended to
block the euphoria by preferentially binding to the same receptors in the brain as the opioid agonist and thereby reducing the incentive
for abuse or misuse by recreational drug abusers.
 
The
Company filed an NDA for the first product to utilize our abuse deterrent technology, Immediate Release Oxycodone 5mg, 10mg, 15mg, 20mg
and 30mg with sequestered Naltrexone (collectively and individually referred to as “SequestOx™”), on January 14, 2016.
Please see “Filed products under FDA review; SequestOx™ - Immediate Release Oxycodone with sequestered Naltrexone”
above and please note that continued development of this product is currently paused.
 
The
Company is currently not selling and is evaluating the market place when deciding to proceed with the above listed filed application.
 
Please
note that, while the FDA is required to review applications within certain timeframes, during the review process, the FDA frequently
requests that additional information be submitted. The effect of such requests and subsequent submissions can significantly extend the
time for the FDA review process. Until a product is actually approved, there can be no assurances that the information requested and
submitted will be considered adequate by the FDA to justify approval. The packaging and labeling of our approved products are also subject
to FDA regulation. Based on the foregoing, it is impossible to anticipate the amount of time that will be needed to obtain FDA approval
and to commercialize a product, if approved. In addition, there can be no assurances of the Company filing the required application(s)
with the FDA or of the FDA approving such application(s) if filed. The Company’s ability to successfully develop and commercialize
products incorporating its abuse deterrent technology is subject to a high level of risk as detailed in “Item 1A-Risk Factors-Risks
Related to our Business” of this Annual Report on Form 10-K.
 

 7 
 

 
Abuse-Deterrent
and Sustained Release Opioids
 
The
abuse-deterrent opioid products utilize our patented abuse-deterrent technology that is based on a pharmacological approach. These products
are combinations of a narcotic agonist formulation intended for use in patients with pain, and an antagonist, formulated to deter abuse
of the drug. Both, agonist, and antagonist, have been on the market for a number of years and sold separately in various dose strengths.
 
The
Company is currently not selling opioids and is evaluating the market place when deciding to proceed with the above listed filed applications.
 
Patents
 
The
Company owns the following patents (as of March 31, 2024):
 


PATENT 
EXPIRATION DATE

U.S. patent 8,425,933 
March 2025

Canadian patent 2,541,371 
April 2024

U.S. patent 9,056,054 
June 2030

U.S. patent 10,213,388 
June 2030

 
We
intend to apply for patents for other products in the future; however, there can be no assurance that any of the pending applications
or other applications which we may file will be granted. We have also filed corresponding foreign applications for key patents.
 
Prior
to the enactment in the United States of new laws adopting certain changes mandated by the General Agreement on Tariffs and Trade (“GATT”),
the exclusive rights afforded by a U.S. Patent were for a period of 17 years measured from the date of grant. Under GATT, the term of
any U.S. Patent granted on an application filed subsequent to June 8, 1995 terminates 20 years from the date on which the patent application
was filed in the United States or the first priority date, whichever occurs first. Future patents granted on an application filed before
June 8, 1995, will have a term that terminates 20 years from such date, or 17 years from the date of grant, whichever date is later.
 
Under
the Drug Price Competition Act, a U.S. product patent or use patent may be extended for up to five years under certain circumstances
to compensate the patent holder for the time required for FDA regulatory review of the product. Such benefits under the Drug Price Competition
Act are available only to the first approved use of the active ingredient in the drug product and may be applied only to one patent per
drug product. There can be no assurance that we will be able to take advantage of this law.
 
Also,
different countries have different procedures for obtaining patents, and patents issued by different countries provide different degrees
of protection against the use of a patented invention by others. There can be no assurance, therefore, that the issuance to us in one
country of a patent covering an invention will be followed by the issuance in other countries of patents covering the same invention,
or that any judicial interpretation of the validity, enforceability, or scope of the claims in a patent issued in one country will be
similar to the judicial interpretation given to a corresponding patent issued in another country. Furthermore, even if our patents are
determined to be valid, enforceable, and broad in scope, there can be no assurance that competitors will not be able to design around
such patents and compete with us using the resulting alternative technology.
 
Trademarks
 
SequestOx™
is a trademark owned by Elite.
 
We
currently plan to license at least some of our products to other entities in the marketing of pharmaceuticals but may also sell products
under our own brand name in which case we may register trademarks for those products.
 
Elite
sells its own products under an “Elite Labs” label.
 

 8 
 

 
Other
Business Factors and Details
 
Government
Regulation and Approval
 
The
design, development, manufacturing, and marketing of pharmaceutical compounds, on which our success depends, are intensely regulated
by governmental regulatory agencies, in particular the FDA and DEA. Non-compliance with applicable requirements can result in fines and
other judicially imposed sanctions, including product seizures, injunction actions and criminal prosecution based on products or manufacturing
practices that violate statutory requirements. In addition, administrative remedies can involve voluntary withdrawal of products, as
well as the refusal of the FDA to approve ANDAs and NDAs. The FDA also has the authority to withdraw approval of drugs in accordance
with statutory due process procedures.
 
Before
a drug may be marketed, it must be approved by the FDA either through an NDA or an ANDA, each of which is discussed below.
 
NDAs
and NDAs under Section 505(b)(2) of the Drug Price Competition Act
 
The
FDA approval procedure for an NDA is generally a two-step process. During the initial product development stage, an investigational new
drug application (“IND”) for each product is filed with the FDA. The IND contains results of animal and in vitro studies
assessing the toxicology, pharmacokinetic, pharmacological, and pharmacodynamics characteristics of the product candidate; chemistry,
manufacturing, and controls information; and any available human data or literature to support the use of the product candidate. A 30-day
waiting period after the filing of each IND is required by the FDA prior to the commencement of initial clinical testing. If the FDA
does not comment on or question the IND within such 30-day period, initial clinical studies may begin. If, however, the FDA has comments
or questions, they must be answered to the satisfaction of the FDA before initial clinical testing may begin. In some instances, this
process could result in substantial delay and expense. Clinical trials are typically conducted in three sequential phases that may overlap
or be combined:
 
Phase
One: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition.
These studies are designed to test the safety, dosage tolerance, absorption, metabolism, and distribution of the investigational product
in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. In the case
of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer
to healthy volunteers, the initial human testing;
 
Phase
Two: The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the
preliminary efficacy, optimal dosages, and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase
2 clinical trials may be conducted to obtain information prior to beginning;
 
Phase
Three: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically
significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial
sites. These clinical trials are intended to establish the overall risk.
 
Concurrent
with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry
and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance
with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate
and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug.
In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life.
 
Assuming
successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development
nonclinical and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of
the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the
product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain
limited circumstances.
 
The
FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing
is cGMP-compliant to assure and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User
Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of
a standard NDA for a new molecular entity to review and act on the submission. This review typically takes 12 months from the date the
NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after the application is
submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing,
to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than
accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application is
also subject to review before the FDA accepts it for filing.
 
The
FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including
clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be
approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations
carefully when making decisions.
 

 9 
 

 
Before
approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve
an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure
consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect
one or more clinical sites to assure compliance with good clinical practices, or GCPs. If the FDA determines that the application, manufacturing
process, or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval.
 
After
the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing
of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the
application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes the
specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase
3 clinical trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies, or manufacturing.
If a Complete Response Letter is issued, the sponsor must resubmit the NDA, addressing all of the deficiencies identified in the letter,
or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria
for approval.
 
If
regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the
indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a Risk Evaluation and Mitigation
Strategy, or REMS to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential
serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use.
It could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods,
patient registries, and other risk minimization tools. The FDA also may offer conditional approval subject to, among other things, changes
to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval
if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace.
The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety
and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing
studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s
policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.
 
The
FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating
to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies
actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can
result in, among other things, adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties.
Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described
in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label
uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their
choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
The federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and
has enjoined companies from engaging in off-label promotion. The FDA and other regulatory agencies have also required that companies
enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. However, companies
may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labeling.
 
Whether
or not FDA approval has been obtained, approval of the product by comparable regulatory authorities in any foreign country must be obtained
prior to the commencement of marketing of the product in that country. We intend to conduct all marketing in territories other than the
United States through other pharmaceutical companies based in those countries. The approval procedure varies from country to country,
can involve additional testing, and the time required may differ from that required for FDA approval. Although there are some procedures
for unified filings for certain European countries, in general each country has its own procedures and requirements, many of which are
time consuming and expensive. Thus, there can be substantial delays in obtaining required approvals from both the FDA and foreign regulatory
authorities after the relevant applications are filed. After such approvals are obtained, further delays may be encountered before the
products become commercially available.
 

 10 
 

 
NDAs
under Section 505(b)(2)
 
Section
505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.
Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from clinical trials
not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference. The FDA may then approve the
new product candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for any
new indication sought by the Section 505(b)(2) applicant.
 
To
the extent that the Section 505(b)(2) applicant is relying on the FDA’s findings of safety and effectiveness for an already approved
product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to
the same extent that an ANDA applicant would. Thus approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming
the referenced product have expired; until any non-patent exclusivity, such as exclusivity for obtaining approval of a NCE, listed in
its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange
Book,” for the referenced product has expired; and, in the case of a Paragraph IV certification and subsequent patent infringement
suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section
505(b)(2) applicant. In the interim period, the FDA may grant tentative approval. Tentative approval indicates that the FDA has determined
that the applicant meets the standards for approval as of the date that the tentative approval is granted. Final regulatory approval
can only be granted if the FDA is assured that there is no new information that would affect final regulatory/ approval.
 
ANDAs
 
To
obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. An ANDA is a
comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient,
bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing
process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include preclinical and
clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a generic manufacturer must rely on
the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference
listed drug, or RLD.
 
In
order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients,
the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA
must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is
bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and
extent of absorption of the listed drug.” Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically
equivalent” to the RLD in the Orange Book. Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully
substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation
of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing
physician or patient.
 
When
an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any patents listed for the reference
product in the FDA’s Orange Book. Specifically, the ANDA applicant must certify that: (i) the required patent information has not
been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval
is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product.
 
If
the follow-on applicant does not challenge the innovator’s listed patents, FDA will not approve the ANDA application until all
the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved
product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the follow-on applicant
has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA
and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement
lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the
receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration
of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.
 
In
May 1992, Congress enacted the Generic Drug Enforcement Act of 1992, which allows the FDA to impose debarment and other penalties on
individuals and companies that commit certain illegal acts relating to the generic drug approval process. In some situations, the Generic
Drug Enforcement Act requires the FDA to not accept or review ANDAs for a period of time from a company or an individual that has committed
certain violations. It also provides for temporary denial of approval of applications during the investigation of certain violations
that could lead to debarment and also, in more limited circumstances, provides for the suspension of the marketing of approved drugs
by the affected company. Lastly, the Generic Drug Enforcement Act allows for civil penalties and withdrawal of previously approved applications.
Neither we nor any of our employees have ever been subject to debarment. We do not believe that we receive any services from any debarred
person.
 

 11 
 

 
Controlled
Substances
 
The
federal Controlled Substances Act of 1970, or CSA, and its implementing regulations establish a “closed system” of regulations
for controlled substances. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution,
importation, exportation, disposal and other requirements under the oversight of the Drug Enforcement Agency, or DEA. The DEA is the
federal agency responsible for regulating controlled substances, and requires those individuals or entities that manufacture, import,
export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent the diversion
of controlled substances to illicit channels of commerce.
 
The
DEA categorizes controlled substances into one of five schedules — Schedule I, II, III, IV or V — with
varying qualifications for listing in each schedule. Schedule I substances by definition have a high potential for abuse, have no currently
accepted medical use in treatment in the United States and lack accepted safety for use under medical supervision. Pharmaceutical products
having a currently accepted medical use that are otherwise approved for marketing may be listed as Schedule II, III, IV or V substances,
with Schedule II substances presenting the highest potential for abuse and physical or psychological dependence, and Schedule V substances
presenting the lowest relative potential for abuse and dependence. The regulatory requirements are more restrictive for Schedule II substances
than Schedule III-V substances.
 
Facilities
that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is
specific to the particular location, activity(ies) and controlled substance schedule(s). For example, separate registrations are required
for importation and manufacturing activities, and each registration authorizes which schedules of controlled substances the registrant
may handle. Certain coincident activities are permitted without obtaining a separate DEA registration, however, such as distribution
of controlled substances by the manufacturer that produces them.
 
The
DEA inspects all manufacturing facilities to review security, recordkeeping, reporting and handling prior to issuing a controlled substance
registration. The specific security requirements vary by the type of business activity and the schedule and quantity of controlled substances
handled. The most stringent requirements apply to manufacturers of Schedule I and Schedule II substances. Required security measures
commonly include background checks on employees and physical control of controlled substances through storage in approved vaults, safes
and cages, and through use of alarm systems and surveillance cameras. Once registered, manufacturing facilities must maintain records
documenting the manufacture, receipt and distribution of all controlled substances. Manufacturers must submit periodic reports to the
DEA of the distribution of Schedule I and II controlled substances, Schedule III narcotic substances, and other designated substances.
Registrants must also report any controlled substance thefts or significant losses, and must obtain authorization to destroy or dispose
of controlled substances.
 
For
drugs manufactured in the United States, the DEA establishes annually an aggregate quota for the amount of substances within Schedules
I and II that may be manufactured or produced in the United States based on the DEA’s estimate of the quantity needed to meet legitimate
medical, scientific, research and industrial needs. The quotas apply equally to the manufacturing of the active pharmaceutical ingredient
and production of dosage forms. The DEA may adjust aggregate production quotas, and individual manufacturing or procurement quotas from
time to time, although the DEA has substantial discretion in whether or not to make such adjustments for individual companies. The DEA
quota system was amended in 2018 to require sponsors to strengthen controls over diversion of controlled substances, controls and limits
the availability and production of controlled substances in Schedule I or II.
 
Federal
laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use. In 2016, the Comprehensive
Addiction and Recovery Act (“CARA”), was enacted to address the national epidemics of prescription opioid abuse and heroin
use. CARA expands the availability of naloxone for law enforcement and other first responders, forms an interagency task force to develop
best practices for pain management with opioid medications and provides resources to improve state monitoring of opioids. The Substance
Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (“SUPPORT Act”), which
was signed into law in November 2018, includes a number of measures directed towards regulation and improvement of treatment for substance
use-disorder and increased coverage by CMS of medically-assisted treatment options. In addition, the SUPPORT Act requires HHS to report
to Congress on existing barriers to access to abuse-deterrent opioid formulations by Medicare Part C and D beneficiaries
 
The
states also maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution,
and dispensing requirements. State authorities, including Boards of Pharmacy, regulate use of controlled substances in each state. Failure
to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can
result in enforcement action that could have a material adverse effect on business, operations and financial conditions. The DEA may
seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances,
violations could lead to criminal prosecution.
 

 12 
 

 
Other
Healthcare Laws and Compliance Requirements
 
Our
activities are subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute,
the federal civil False Claims Act, and laws and regulations pertaining to limitations on and reporting of healthcare provider payments
(physician sunshine laws). These laws and regulations are interpreted and enforced by various federal, state and local authorities including
CMS, the Office of Inspector General for the U.S. Department of Health and Human Services, the U.S. Department of Justice, individual
U.S. Attorney offices within the Department of Justice, and state and local governments. These laws include:
 


 
●
the
    U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting,
    offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward
    either the referral of an individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or
    order of, any good or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare
    and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order
    to have committed a violation;

 
 
 

 
●
the
    U.S. civil False Claims Act (which can be enforced through “qui tam,” or whistleblower actions, by private citizens on
    behalf of the federal government and impose civil and criminal penalties), prohibits any person from, among other things, knowingly
    presenting, or causing to be presented false or fraudulent claims for payment of government funds or knowingly making, using or causing
    to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly
    avoiding, decreasing or concealing an obligation to pay money to the U.S. federal government;

 
 
 

 
●
U.S.
    federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal liability and amends provisions
    on the reporting, investigation, enforcement, and penalizing of civil liability for, among other things, knowingly and willfully
    executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing
    or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare
    benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs;
    similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific
    intent to violate it in order to have committed a violation;

 
 
 

 
●
HIPAA,
    as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations,
    which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission
    of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as
    health plans, healthcare clearinghouses and healthcare providers as well as their business associates and their subcontractors that
    perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

 
 
 

 
●
state
    laws and regulations, including state anti-kickback and false claims laws, that may apply to our business practices, including but
    not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed
    by any third-party payer, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical
    industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government,
    or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and
    regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking
    gifts and other remuneration and items of value provided to healthcare professionals and entities; and

 
 
 

 
●
the
    Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, requires certain manufacturers
    of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health
    Insurance Program to report annually to CMS information related to certain payments made in the preceding calendar year and other
    transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their
    immediate family members; beginning in 2022, applicable manufacturers are required to report such information regarding payments
    and transfers of value provided, as well as ownership and investment interests held, during the previous year to physician assistants,
    nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

 

 13 
 

 
Violations
of any of these laws or any other governmental regulations that may apply to us, may subject us to significant civil, criminal and administrative
sanctions including penalties, damages, fines, imprisonment, and exclusion from government funded healthcare programs, such as Medicare
and Medicaid, and/or adverse publicity.
 
Moreover,
government entities and private litigants have asserted claims under state consumer protection statutes against pharmaceutical companies
for alleged false or misleading statements in connection with the marketing, promotion and/or sale of pharmaceutical products, including
state investigations and litigation by certain government entities regarding the marketing of opioid products.
 
Foreign
Corrupt Practices Act
 
The
Foreign Corrupt Practices Act, or the FCPA, generally prohibits offering, promising, giving, or authorizing others to give anything of
value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or
retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions
of the corporation and to devise and maintain an adequate system of internal accounting controls. Our industry is heavily regulated and
therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many
other countries, the health care providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals
are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently,
the SEC and Department of Justice have increased their FCPA enforcement activities with respect to pharmaceutical companies. Violations
could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements
to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions
on the conduct of our business. Enforcement actions may be brought by the Department of Justice or the Securities and Exchanges Commission
(“SEC”), and recent enacted legislation has expanded the SEC’s power to seek disgorgement in all FCPA cases filed in
federal court and extended the statute of limitations in SEC enforcement actions in intent-based claims such as those under the FCPA
from five years to ten years.
 
Coverage
and Reimbursement
 
Sales
of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal,
state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement
for such product by third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any newly approved
product. Decisions regarding the extent of coverage and amount of reimbursement to be provided for any product are made on a plan-by-plan
basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage
for the product. As a result, the coverage determination process can require manufacturers to provide scientific details, information
on cost-effectiveness, and clinical support for the use of a product to each payor separately. This can be a time-consuming process,
with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
 
In
addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and related services. The U.S. government
and state legislatures have continued implementing cost-containment programs, including price controls and restrictions on coverage and
reimbursement. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the
cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of
any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could
reduce physician usage and patient demand for the product.
 
The
Inflation Reduction Act of 2022 (“IRA”) contains substantial drug pricing reforms, including the establishment of a drug
price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge a negotiated
“maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment
requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation,
and requires manufacturers to provide discounts on Part D drugs. Substantial penalties can be assessed for noncompliance with the drug
pricing provisions.
 
Drugs
with an available generic or biosimilar, certain drugs that represent a limited portion of Medicare program spending, drugs with an orphan
designation as their only FDA approved indication, and all plasma-derived products are exempt from direct negotiation. The number of
negotiated products will be phased in between 2026 and 2029, and the law sets a maximum fair price the manufacturer can charge based
on the number of years the product has been on the market. The law allows HHS to levy an excise and civil monetary penalties against
non-compliant manufacturers or those who refuse to negotiate.
 

 14 
 

 
The
IRA also imposes rebate requirements on manufacturers of single-source generics and other drugs covered under Medicare Part B and Part
D where the price of the drug increases faster than inflation. Multisource generics and all products with an average manufacturer’s
price less than $100 per year, per individual, are exempt from rebate requirements. Beginning on October 1, 2022 for Part D products
and on January 1, 2023 for Part B products, CMS will monitor for products with price increases higher than the rate of inflation on a
quarterly basis. Rebates will be calculated as the total number of units sold by the amount the product exceeds the inflation-adjusted
price, with 2021 as the base year to measure cumulative changes relative to inflation. Noncompliant manufacturers will be subject to
a civil monetary penalty of at least 125% of the calculated rebate amount.
 
The
effect of the Inflation Reduction Act of 2022 on our business, generic manufacturers, and the pharmaceutical industry in general is not
yet known.
 
We
expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit
the amounts that third-party payors, including government payors, will pay for healthcare products and services, which could result in
limited coverage and reimbursement and reduced demand for our products or additional pricing pressures.
 
Compliance
with Environmental Laws
 
We
are subject to comprehensive federal, state and local environmental laws and regulations that govern, among other things, air polluting
emissions, waste water discharges, solid and hazardous waste disposal, and the remediation of contamination associated with current or
past generation handling and disposal activities, including the past practices of corporations as to which we are the legal successor
or in possession. We do not expect that compliance with such environmental laws will have a material effect on our capital expenditures,
earnings, or competitive position in the foreseeable future. There can be no assurance, however, that future changes in environmental
laws or regulations, administrative actions or enforcement actions, or remediation obligations arising under environmental laws will
not have a material adverse effect on our capital expenditures, earnings, or competitive position.
 
Competition
 
We
have competition with respect to our principal areas of operation. We develop and manufacture generic products, products using controlled-release
drug technology, products utilizing abuse deterrent technologies, and we develop and market (either on our own or by license to other
companies) generic and proprietary controlled-release and abuse deterrent pharmaceutical products. In both areas, our competition consists
of those companies which develop controlled release, abuse deterrent drugs and alternative drug delivery systems. We do not represent
a significant presence in the pharmaceutical industry.
 
An
increasing number of pharmaceutical companies have become interested in the development and commercialization of products incorporating
advanced or novel drug delivery systems. Some of the major pharmaceutical companies have invested and are continuing to invest significant
resources in the development of their own drug delivery systems and technologies and some have invested funds in such specialized drug
delivery companies. Many of these companies have greater financial and other resources as well as more experience than we do in commercializing
pharmaceutical products. Certain companies have a track record of success in developing controlled-release drugs. Significant among these
are, without limitation, Pfizer, Sandoz (a Novartis company), Mylan Laboratories, Inc., Endo Pharmaceuticals, Inc., Teva Pharmaceuticals
Industries Ltd., Amneal Laboratories, Inc., Mallinckrodt, and Aurobindo. Each of these companies has developed expertise in certain types
of drug delivery systems, although such expertise does not carry over to developing a controlled-release version of all drugs. Such companies
may develop new drug formulations and products or may improve existing drug formulations and products more efficiently than we can. In
addition, almost all of our competitors have vastly greater resources than we do. While our product development capabilities and, if
obtained, patent protection may help us to maintain our market position in the field of advanced drug delivery, there can be no assurance
that others will not be able to develop such capabilities or alternative technologies outside the scope of our patents, if any, or that
even if patent protection is obtained, such patents will not be successfully challenged in the future.
 
In
addition to competitors that are developing products based on drug delivery technologies, there are also companies that have announced
that they are developing opioid abuse-deterrent products that might compete directly or indirectly with Elite’s products. These
include, but are not limited to Pfizer Inc., Collegium Pharmaceuticals, Inc., and Purdue Pharma LP.
 
We
also face competition in the generic pharmaceutical market. The principal competitive factors in the generic pharmaceutical market include:
(i) introduction of other generic drug manufacturers’ products in direct competition with our products under development, (ii)
introduction of authorized generic products in direct competition with any of our products under development, particularly if such products
are approved and sold during exclusivity periods, (iii) consolidation among distribution outlets through mergers and acquisitions and
the formation of buying groups, (iv) ability of generic competitors to quickly enter the market after the expiration of patents or exclusivity
periods, diminishing the amount and duration of significant profits, (v) the willingness of generic drug customers, including wholesale
and retail customers, to switch among pharmaceutical manufacturers, (vi) pricing pressures and product deletions by competitors, (vii)
a company’s reputation as a manufacturer and distributor of quality products, (viii) a company’s level of service (including
maintaining sufficient inventory levels for timely deliveries), (ix) product appearance and labelling and (x) a company’s breadth
of product offerings.
 

 15 
 

 
Sources
and Availability of Raw Materials; Manufacturing
 
A
significant portion of our raw materials may be available only from foreign sources. Foreign sources can be subject to the special risks
of doing business abroad, including:
 


 
●
Greater
    possibility for disruption due to transportation or communication problems;

 
 
 

 
●
The
    relative instability of some foreign governments and economies;

 
 
 

 
●
Interim
    price volatility based on labor unrest, materials or equipment shortages, export duties, restrictions on the transfer of funds, or
    fluctuations in currency exchange rates; and,

 
 
 

 
●
Uncertainty
    regarding recourse to a dependable legal system for the enforcement of contracts and other rights.

 
While
we currently obtain the raw materials that we need from over 20 suppliers, some materials used in our products are currently available
from only one supplier or a limited number of suppliers. The FDA requires identification of raw material suppliers in applications for
approval of drug products. If raw materials were unavailable from a specified supplier, FDA approval of a new supplier could delay the
manufacture of the drug involved.
 
We
have acquired pharmaceutical manufacturing equipment for manufacturing our products. We have registered our facilities with the FDA and
the DEA.
 
Our
Reporting Segments
 
We
currently operate in two segments, which are products whose marketing approvals were secured via an ANDA and products whose
marketing approvals were secured via an NDA. ANDA products are referred to as generic pharmaceuticals and NDA products are referred
to as branded pharmaceuticals. During fiscal year ended March 31, 2024 and 2023, the Company has paused further development of NDAs
and has not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has only engaged in
business activities in a single operating segment. For the years ended March 31, 2024 and 2023 revenue from our ANDA segment were
$56.6 million and $34.2 million, respectively. 
 
Segment
information is consistent with the financial information regularly reviewed by our chief operating decision maker, who we have determined
to be the chief executive office, for the purposes of making decisions about allocating resources and assessing performance of the Company.
There are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating
decision maker does not review this information by segment.
 
Employees
 
As
of June 1, 2024, we had 64 full-time employees. Full-time employees are engaged in operations, administration, research, and development.
None of our employees is represented by a labor union and we have never experienced a work stoppage. We believe our relationship with
our employees to be good. However, our ability to achieve our financial and operational objectives depends in large part upon our continuing
ability to attract, integrate, retain, and motivate highly qualified personnel, and upon the continued service of our senior management
and key personnel.
 
ITEM
1A. RISK FACTORS
 
An
investment in the Company’s securities involves a high degree of risk. You should carefully consider the risks described below
as well as other information provided to you in this report, including information in the section of this document entitled “Forward
Looking Statements.” The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties
not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following
risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of
our Common Stock could decline, and you may lose all or part of your investment.
 
In
addition to the other information contained in this report, the following risk factors should be considered carefully in evaluating an
investment in us and in analyzing our forward-looking statements.
 
Risk
Factor Summary
 
The
following is a summary of the risk factors contained in this Annual Report on Form 10-K that could adversely affect our business, ability
to operate, financial condition, results of operation, equity and cash flows. This summary does not address all of the risks that we
face and is qualified in its entirety by reference to the more detailed descriptions included below. In addition to this summary, we
strongly encourage you to carefully review the full risk factors in their entirety.
 

 16 
 

 
Business
Related Risks
 


 
●
The
    pharmaceutical industry is highly competitive.

 
 
 

 
●
Natural
    disasters and associated supply chain effects.

 
 
 

 
●
Interruptions
    in operations at our sole facility could have a material adverse effect on our business.

 
 
 

 
●
We
    may sell, withdraw or discontinue manufacture of certain products.

 
 
 

 
●
We
    may fail to successfully identify, develop, and commercialize new products.

 
 
 

 
●
Introduction
    of generic equivalents of our products by competitors.

 
 
 

 
●
Our
    operations could be disrupted by failure of our information systems or cyber-attacks and artificial.

 
 
 

 
●
Artificial
    intelligence based platforms my present new risks and challenges to our business.

 
 
 

 
●
Delays
    in product development may result in failure to achieve adequate return on investment.

 
 
 

 
●
Our
    business is dependent on market acceptance of our products, social and political pressures, including public concern over the abuse of certain products, including opioids..

 
 
 

 
●
Unstable
    economic conditions may adversely affect our business.

 
 
 

 
●
We
    depend on qualified scientific and technical personnel and our ability to attract and retained such.

 
 
 

 
●
Unsuccessful
    collaboration or licensing arrangements could limit revenues and product development.

 
 
 

 
●
Substantial
    portion of revenues is derived from a limited number of products.

 
 
 

 
●
We
    depend to a large extent on third-party suppliers and distributors for the raw materials for our products.

 
 
 

 
●
Risks
    related to incorrect or inadequate provision for price adjustments and sales allowances

 
Financial
and Liquidity Related Risks
 


 
●
We
    have identified material weaknesses in our internal controls over financial reporting

 
 
 

 
●
We
    have a relatively limited operating history and our operating results could fluctuate significantly.

 
 
 

 
●
Our
    ability to fund operations is uncertain and we may require additional financing to meet objectives.

 
 
 

 
●
We
    most likely will require additional financing to meet our business objectives.

 
 
 

 
●
We
    have substantial indebtedness which may adversely affect our financial condition.

 
 
 

 
●
There
    is a risk of impairment of significant intangible assets on our balance sheet.

 
 
 

 
●
GAAP
    requires estimates, judgements and assumptions which inherently contain uncertainties.

 
Legal
and Regulatory Risks
 


 
●
The
    pharmaceutical industry is heavily regulated which creates uncertainty and substantial compliance costs.

 
 
 

 
●
Our
    business may be adversely affected by legislation or healthcare regulatory reform and initiatives.

 
 
 

 
●
Use
    of generics may be limited through legislative, regulatory or efforts of pharmaceutical companies.

 
 
 

 
●
Our
    revenues and profits from generic products may decline as a result of changes in regulatory policy.

 
 
 

 
●
New
    tariffs and evolving trade policy between the US and other countries may adversely affect our business.

 
 
 

 
●
The
    DEA could limit the availability of active ingredients used in many of our products.

 
 
 

 
●
We
    received a Complete Response Letter (“CRL”) from the FDA indicating that the SequestOx™ NDA is not ready for approval.

 
 
 

 
●
Regulatory
    factors may cause us to be unable to manufacture products or face interruptions in our manufacturing process.

 
 
 

 
●
Agreements
    between branded pharmaceutical companies and generic pharmaceutical companies are facing increased government scrutiny in the United
    States and Internationally.

 
 
 

 
●
Complex
    reporting and payment obligations under the Medicaid rebate program.

 
 
 

 
●
Investigations
    and litigation concerning the calculation of average wholesale prices may adversely affect our business

 

 17 
 

 
Litigation
and Liability Related Risks
 


 
●
We
    may not be able to obtain or maintain adequate insurance coverages.

 
 
 

 
●
Litigation,
    product liability claims, product recalls, government investigations and other significant legal proceedings are common in the pharmaceutical
    industry.

 
 
 

 
●
We
    are subject to various fraud and abuse laws which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
    harm, and diminished profits and future earnings.

 
 
 

 
●
Our
    products contain controlled substances which may subject us to increased litigation risk and regulation.

 
 
 

 
●
Mandatory
    REMS programs could increase the cost, burden, and liability associated with the commercialization of certain products.

 
 
 

 
●
Illegal
    distribution and third party sale of counterfeit versions of our products could have a detrimental effect on our reputation and business.

 
 
 

 
●
Competitors
    or other third parties may allege that we are infringing upon their IP.

 
Intellectual
Property Related Risks
 


 
●
Our
    ability to protect intellectual property rights and successfully defend third party allegations of intellectual property infringement
    is vital to our business and uncertain.

 
Risks
Related to our Common Shares
 


 
●
Dilution
    from issuance of shares to Lincoln Park, Directors, Employees, Consultants or upon exercise of warrants and options or the perception
    that dilution may occur could cause the price per share of common stock to fall.

 
 
 

 
●
Our
    common stock is a penny stock, quoted on the OTC bulletin board, with rules in place that could limit trading and liquidity of our
    shares, increased transaction costs that could adversely affect our price per share.

 
 
 

 
●
Shareholder
    activism could negatively affect us.

 
 
 

 
●
Our
    stock price has been volatile.

 
 
 

 
●
Capital
    raises through sales of securities may cause substantial dilution to existing shareholders.

 
 
 

 
●
Issuance
    of shares of common or preferred stock could make achieving a change of control more difficult.

 
 
 

 
●
We
    have no plans to pay regular dividends or conduct ordinary share purchases.

 
Business
Related Risks
 
The
pharmaceutical industry is highly competitive.
 
The
pharmaceutical industry is highly competitive and subject to rapid and significant technological change, and we may be unable to compete
effectively, which could impair our ability to implement our business model. Competitive factors faced include, without limitation:
 


 
●
Introduction
    of other generic drug manufacturers’ products in direct competition with our generic drug products;

 
 
 

 
●
Introduction
    of authorized generic drug products in direct competition with our products, particularly during any period of exclusivity;

 
 
 

 
●
The
    ability of generic drug product competitors to quickly enter the market after the expiration of patents or exclusivity periods, diminishing
    the amount and duration of significant profits;

 
 
 

 
●
Consolidation
    among distribution outlets through mergers and acquisitions and the formation of buying groups;

 
 
 

 
●
The
    willingness of generic drug customer, including, without limitation, wholesale and retail customers, to switch among products of
    different generic pharmaceutical manufacturers;

 
 
 

 
●
Pricing
    pressures by competitors and customers, even if similar price savings are not passed on to consumers;

 
 
 

 
●
A
    company’s reputation as a manufacturer and distributor of quality generic pharmaceutical products;

 
 
 

 
●
A
    company’s level of service, including, without limitation, maintaining sufficient inventory levels for deliveries consistent
    with customer expectations;

 
 
 

 
●
A
    company’s ability to use and integrate technology, including the use and integration of artificial intelligence;

 
 
 

 
●
Product
    appearance and labeling;

 

 18 
 

 


 
●
A
    company’s breadth of product offerings;

 
 
 

 
●
Rapid
    and significant technological change;

 
 
 

 
●
Development
    and commercialization of advanced or novel drug delivery systems;

 
 
 

 
●
Availability
    of greater financial resources to fund research and development, marketing, human resources and other operational and overhead resources
    and capabilities;

 
 
 

 
●
Development
    of new formulations and products, or improvement of existing ones, at higher levels of efficiency; and

 
 
 

 
●
We
    depend on third party suppliers and distributors for the raw materials for our products.

 
Our
success, if any, will depend in part on our ability to successfully keep pace with these factors.
 
As
we expand our presence in the generic pharmaceuticals market our products may face intense competition from brand-name companies that
have taken aggressive steps to thwart competition from generic companies. In particular, brand-name companies continue to sell or license
their products directly or through licensing arrangements or strategic alliances with generic pharmaceutical companies (so-called “authorized
generics”). No significant regulatory approvals are required for a brand-name company to sell directly or through a third party
to the generic market, and brand-name companies do not face any other significant barriers to entry into such market. In addition, such
companies continually seek to delay generic introductions and to decrease the impact of generic competition, using tactics which include,
without limitation:
 


 
●
Obtaining
    new patents on drugs whose original patent protection is about to expire;

 
 
 

 
●
Filing
    patent applications that are more complex and costly to challenge;

 
 
 

 
●
Filing
    suits for patent infringement that automatically delay approval from the FDA;

 
 
 

 
●
Filing
    citizens’ petitions with the FDA contesting approval of the generic versions of products due to alleged health and safety issues;

 
 
 

 
●
Developing
    controlled-release or other “next-generation” products, which often reduce demand for the generic version of the existing
    product for which we may be seeking approval;

 
 
 

 
●
Changing
    product claims and product labeling;

 
 
 

 
●
Developing
    and marketing as over-the-counter products those branded products which are about to face generic competition; and,

 
 
 

 
●
Making
    arrangements with managed care companies and insurers to reduce the economic incentives to purchase generic pharmaceuticals.

 
These
strategies may increase the costs and risks associated with our efforts to introduce our generic products under development and may delay
or prevent such introduction altogether.
 
In
addition, sales of our products may be adversely affected by the continuing consolidation within the retail and wholesale pharmaceutical
markets. Our products, whether sold directly by the Company or through third parties that are licensed to market and distribute our products
are sold in large part to a market that is comprised of a relatively few retail drug chains, wholesalers, and managed care organizations,
with such entities continuing to undergo consolidation. Such consolidation may provide these customers or our products with additional
purchasing leverage, and consequently, may increase the pricing pressures faced by us. Additionally, the emergence of large buying groups
representing independent retail pharmacies, and the prevalence and influence of managed care organizations and similar institutions,
enable those groups to extract price discounts on our products and our revenues and quarterly results comparisons may also be affected
by fluctuations in the buying patterns of retail chains, major distributors, and other trade buyers.
 
Furthermore,
policies regarding returns, rebates, allowances and chargebacks, and marketing programs adopted by wholesalers may reduce our revenues
in future fiscal periods. Based on industry practice, generic drug manufacturers have liberal return policies and have been willing to
give customers post-sale inventory allowances. Such industry practices apply to the current sales of our products by our marketing partners,
which in turn effect profit splits and license fees received, and they will also affect prospective future sales made directly by Company.
 

 19 
 

 
Under
these arrangements, from time to time, customers are given credits on our generic products that are held by them in inventory after there
is a decrease in the market prices of the same generic products due to competitive pricing. Therefore, if new competitors enter the marketplace
and significantly lower the prices of any of their competing products, the price of our products would also likely be reduced. As a result,
we, or are marketing partners, would be obligated to provide credits to our customers who are then holding inventories of such products,
which could reduce sales revenue, profit splits, license fees and gross margin for the period the credit is provided. Like most competitors
in this market, our marketing partners, or us in the case of prospective direct sales made by the Company, also give credits for chargebacks
to wholesalers that have contracts with our marketing partners, or us, prospectively, for their sales to hospitals, group purchasing
organizations, pharmacies, or other customers. A chargeback is the difference between the price the wholesaler pays and the price that
the wholesaler’s end-customer pays for a product. Although, our marketing partners establish, and prospectively we would also establish
reserves based on prior experience and best estimates of the impact that these policies may have in subsequent periods, we cannot ensure
that such reserves established are adequate or that actual product returns, rebates, allowances, and chargebacks will not exceed estimates.
Differences between established reserves and actual amounts of such credits and charges, could result in a material adverse effect on
our business, financial condition, results of operations, cash flow and stock price.
 
The
existence and occurrence of any of the above could have a material adverse effect on our business, financial condition, results of operations,
cash flow, ability to operate and stock price.
 
Natural
disasters could cause closures of our facilities and disrupt our operations.
 
Furthermore,
the occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, floods, and other forms
of severe hazards in the United States or in other countries in which we or our suppliers operate or are located could adversely affect
our operations and financial performance. We have lost power or had to shut down operations as a result of extreme weather and natural
disasters. These types of unexpected events could result in physical damage to and complete or partial closure of one or more of distribution
centers or manufacturing facilities, or the temporary or long-term disruption in the supply of products, and/or disruption of our ability
to deliver products to customers. Further, the long-term effects of climate change on general economic conditions and the pharmaceutical
manufacturing and distribution industry in particular are unclear, and changes in the supply, demand or available sources of energy and
the regulatory and other costs associated with energy production and delivery may affect the availability or cost of goods and services,
including natural resources, necessary to run our businesses. Existing insurance arrangements may not provide protection for the costs
that may arise from such events, particularly if such events are catastrophic in nature or occur in combination. Any long-term disruption
in our ability to service our customers from one or more distribution centers or outsourcing facilities could have a material adverse
effect on our operations, our business, results of operations and stock price.
 
Interruptions
in operations at our sole facility could have a material adverse effect on our business.
 
If
our manufacturing facility or the facilities of any of our suppliers fail to comply with regulatory requirements or encounter other manufacturing
difficulties, it could adversely affect our ability to manufacture and supply products. All facilities and manufacturing processes used
for the manufacture of pharmaceutical products are subject to inspection by regulatory agencies at any time and must be operated in conformity
with current good manufacturing practice (“cGMP”) and, in the case of controlled substances, DEA regulations. Compliance
with the FDA’s cGMP and DEA requirements applies to both drug products seeking regulatory approval and to approved drug products.
In complying with cGMP requirements, pharmaceutical manufacturing facilities must continually expend significant time, money and effort
in production, recordkeeping, quality assurance and quality control so that their products meet applicable specifications and other requirements
for product safety, efficacy and quality. Failure to comply with applicable legal requirements subjects us, our manufacturing facilities
and the facilities of our third-party suppliers to possible legal or regulatory action, including, without limitation, shutdown, which
may adversely affect our ability to supply the product. Additionally, our manufacturing facilities, and those of our third party suppliers
may face other significant disruptions due to labor strikes, failure to reach acceptable agreement with labor unions, infringement of
intellectual property rights, vandalism, natural disaster, pandemics, storm or other environmental damage, civil or political unrest,
export or import restrictions or other events. Were we not able to manufacture products at our manufacturing facilities or were our third
party suppliers unable to manufacture products at their facilities because of regulatory, business or any other reasons, the manufacture
and marketing of these products would be interrupted. This could have a material adverse impact on our business, results of operation,
financial condition, cash flows, competitive position and ability to operate.
 
Furthermore,
all of our manufacturing operations are conducted at the Northvale Facility and any delays or unanticipated expenses in connection with
the operation at the Northvale Facility, resulting in a significant disruption at this facility, even on a short-term basis, whether
due to, without limitation, an adverse quality or compliance observation, including a total or partial suspension of production and/or
distribution by regulatory authorities, an act of God, civil or political unrest, force majeure situation or other events could impair
our ability to produce and ship products on a timely basis, and could, among other consequences, subject us to exposure to claims from
customers. Any of these events could have a material adverse effect on our business, results of operations, financial condition, and
cash flows.
 

 20 
 

 
We
may sell, withdraw or discontinue manufacture of certain products.
 
We
may discontinue the manufacture and distribution of certain existing products, which may adversely affect our business, results of operations,
financial condition, and cash flows. As part of regular evaluations of product performance, we may determine that it is in our best interest
to discontinue the manufacture and distribution of certain of our products. We cannot guarantee that we have correctly forecasted, or
will correctly forecast in the future, the appropriate products to discontinue or that a decision to discontinue various products is
prudent if market conditions change. In addition, there can be no assurances that the discontinuance of products will reduce operating
expense or not cause the incurrence of material charges associated with such a decision. Furthermore, the discontinuance of existing
products, entails various risks, including, without limitation, the ability to find a purchaser for such products, if there is a decision
to sell the product, as well as the risk that the purchase price obtained will not be equal to at least the book value of the net assets
relating to such products. Other risks associated with a product discontinuance, include, without limitation, managing the expectations
of and maintaining good relations with our customers who previously purchased a discontinued product from us, and the effects such would
have on future sales to these customers. We may also incur significant liabilities and costs associated with our product discontinuance.
 
In
addition, we may, from time to time, sell and/or withdraw approved ANDAs if we determine that the costs of maintaining such ANDAs is
excessive when compared to their actual current value and their perceived value and place in our strategic plans.
 
Although
our expectations are to engage only in the sale or withdrawal of ANDAs if they advance or otherwise support our overall strategy, any
such ANDA sale by definition reduces the size and scope of our business, with a direct correlation to opportunities with respect to certain
markets, products or therapeutic categories.
 
All
of the foregoing could have a material adverse effect on our business, results of operations, financial condition, cash flows and ability
to operate.
 
We
may fail to successfully identify, develop and commercialize new products.
 
Elite’s
product pipeline, including the paused development of its abuse deterrent opioid products, are in various stages of development. Prior
to commercialization, product development must be completed that could include scale-up, clinical studies, bioequivalence studies, regulatory
filing, regulatory review, approval by the FDA, and/or other development steps. Development is subject to risks. We cannot assure you
that development will be successful, or that during development unexpected delays might occur or additional costs might be incurred.
 
In
order to obtain FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans or bioequivalence
to the reference listed drug. To meet these requirements, we must conduct extensive preclinical testing and “adequate and well-controlled”
clinical trials and/or bioequivalence studies. Conducting clinical trials and bioequivalence studies is a lengthy, time-consuming, and
expensive process. Completion of necessary clinical trials may take several years or more. Delays associated with product candidates
for which we are directly conducting preclinical or clinical trials may cause us to incur additional operating expenses. The commencement
and rate of completion of clinical trials may be delayed by many factors, including, without limitation, for example:
 


 
●
Ineffectiveness
    of our product candidate or perceptions by physicians that the product candidate is not safe or effective for a particular indication;

 
 
 

 
●
Inability
    to manufacture sufficient quantities of the product candidate for use in clinical trials or bioequivalence studies;

 
 
 

 
●
Delay
    or failure in obtaining approval of our clinical trial protocols from the FDA or institutional review boards;

 
 
 

 
●
Slower
    than expected rate of patient recruitment and enrollment;

 
 
 

 
●
Inability
    to adequately follow and monitor patients after treatment;

 
 
 

 
●
Difficulty
    in managing multiple clinical sites;

 
 
 

 
●
Unforeseen
    safety issues;

 
 
 

 
●
Government
    or regulatory delays; and,

 
 
 

 
●
Clinical
    trial or bioequivalence costs that are greater than we currently anticipate.

 
Even
if we achieve positive interim results in clinical trials and bioequivalence studies, these results do not necessarily predict final
results, and positive results in early trials and studies may not be indicative of success in later trials and studies. A number of companies
in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after achieving promising results
in earlier trials. Negative or inconclusive results or adverse medical events during a clinical trial could cause us to repeat or terminate
a clinical trial or require us to conduct additional trials. We do not know whether our existing or any future clinical trials or bioequivalence
studies will demonstrate safety and efficacy, or bioequivalence to the reference listed drug, sufficiently to result in marketable products.
Our clinical trials may be suspended at any time for a variety of reasons, including if the FDA or we believe the patients participating
in our trials are exposed to unacceptable health risks or if the FDA finds deficiencies in the conduct of these trials.
 

 21 
 

 
Failures
or perceived failures in our clinical trials or bioequivalence studies will directly delay our product development and regulatory approval
process, damage our business prospects, make it difficult for us to establish collaboration and partnership relationships, and negatively
affect our reputation and competitive position in the pharmaceutical community.
 
Our
ability to sustain current operations, engender business growth, achieve current and future revenues and profitability, significantly
depends on our ability to successfully identify, develop, obtain regulatory approval, commercialize and market new pharmaceutical products,
including, without limitation, our own products as well as those that may be developed in partnership with other entities, such as those
that were previously developed with Praxgen pursuant to a now terminated product development agreement. As a result, we must continually
develop, test and manufacture new products, which must meet regulatory standards to receive requisite marketing authorizations.
 
The
process of developing and obtaining regulatory approvals for new products is time-consuming, costly and inherently unpredictable. There
are direct, indirect, known and unknown risks inherent in the development of pharmaceuticals, including, without limitation, product
candidates which initially show promise in preliminary pharmacological or marketing studies, but fail to yield the positive results consistent
with initial indications. Product candidates we may develop may not receive the marketing authorizations necessary for us to market them
and, if approved, we may be unable to successfully commercialize them on a timely basis or at all, or if commercialized, revenues and
profits achieved from the sale of such products might not reach levels that provide sufficient return on those costs incurred during
the commercialization process.
 
The
successful commercialization of a product is subject to a number of factors, including:
 


 
●
The
    timely filing of any NDA, ANDA or other regulatory submission applicable to our product candidates;

 
 
 

 
●
Any
    adverse development or perceived adverse development with respect to the applicable regulatory agency’s review of such regulatory
    submission and approval for the indication sought;

 
 
 

 
●
The
    effectiveness, ease of use and safety of our products as compared to existing products;

 
 
 

 
●
Customer
    demand and the willingness of physicians and customers to adopt our products over products with which they may have more loyalty
    or familiarity and overcoming any biases towards our products;

 
 
 

 
●
The
    cost of our product compared to alternative products and the pricing and commercialization strategies of our competitors;

 
 
 

 
●
The
    success of our launch and marketing efforts;

 
 
 

 
●
Adverse
    publicity about us, our products, our competitors and their products or the industry as a whole or favorable publicity about competitors;

 
 
 

 
●
The
    advent of new and innovative alternative products; and

 
 
 

 
●
Any
    unforeseen issues or adverse developments in connection with a product and any resulting litigation or regulatory scrutiny and harm
    to our reputation or the reputation or acceptance of the product in the market.

 
In
addition, there are many risks associated with developing, commercializing and marketing new products that are beyond our control. For
example, without limitation, our collaboration partner(s) may decide to make substantial changes to a product’s formulation or
design, may experience financial difficulties or may have limited financial resources. Any of the foregoing may delay the development,
commercialization and/or marketing of new products. In addition, if a codeveloper on a new product terminates our collaboration agreement
or does not perform under the agreement, we may experience delays and additional costs in developing and marketing that product, with
no assurances of us having the resources that may be required to overcome such delays or additional costs that were beyond our control.
 
We
conduct research and development to enable us to manufacture and market pharmaceutical products in accordance with specific government
regulations. Our drug development efforts relating to SequestOx™, which are currently paused, and certain generics are focused
on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. Typically, expenses related
to research, development, and regulatory approval of compounds for SequestOx™, which is a branded pharmaceutical product, the development
of which is currently paused, are significantly greater than those expenses associated with generic products. Expanded research and development
efforts are required, resulting in increased research expenses. Because of the inherent risk associated with research and development
efforts in the healthcare industry, particularly with respect to new drugs, our research and development expenditures may not result
in the successful regulatory approval and introduction of new pharmaceutical products and failure in the development of any new product
can occur at any point in the process, including late in the process after substantial investment. Also, after we submit a regulatory
application, the relevant governmental health authority may require that we conduct additional studies, including, for example, studies
to assess the product’s interaction with alcohol. As a result, we may be unable to reasonably predict the total research and development
costs to develop a particular product and there is a significant risk that the funds we invest in research and development will not generate
financial returns. In addition, our operating results and financial condition may fluctuate as the amount we spend to research and develop,
commercialize, acquire or license new products, technologies and businesses changes. Much of the preceding occurred with the development
of SequestOx™, which has not received marketing approval from the FDA, for which continued development has been paused and with
material adverse effects on our business, results of operations, financial condition, cash flows and ability to operate resulting in
the past, as well as the risk remaining for the future.
 

 22 
 

 
Because
of these risks, our research and development efforts may not result in any commercially viable products. Any delay in, or termination
of, preclinical or clinical trials will delay the filing of our drug applications with the FDA and, ultimately, our ability to commercialize
product candidates and generate product revenues. If a significant portion of these development efforts are not successfully completed,
required regulatory approvals are not obtained, or any approved products are not commercially successful, our business, financial condition,
and results of operations may be materially harmed.
 
As
our competitors introduce their own generic equivalents of our generic drug products, our revenues and gross margin from such products
generally decline, often rapidly.
 
Revenues
and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that
we believe are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product or any statutory period of marketing
exclusivity expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product is often able
to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for their own generic
versions, that market share, and the price of the that product, will typically decline depending on several factors, including, without
limitation, the number of competitors, the price of the branded product and the pricing strategy of the new competitors. Significant
competition in the generic pharmaceutical marketplace is not uncommon with one result of such being significant decline in revenue and
gross margins. There can be no assurances of our ability to continue to develop new products or that the number of competitors for any
given product will not increase to such an extent that we may stop marketing a generic drug product for which we previously obtained
approval, resulting in a material adverse effect on our business, financial condition, results of operations, cash flow, ability to operate
and stock price.
 
Our
operations could be disrupted by failure of our information systems or cyber-attacks.
 
Significant
disruptions to our IT systems or breaches of information security could adversely affect our business. In the ordinary course of business,
we collect, store and transmit what we consider to be large amounts of confidential information, and it is critical that we do so in
a secure manner to maintain the confidentiality and integrity of such information. Additionally, our IT systems are critical to our ability
to store electronic and financial information and to manage a variety of business processes and activities, including, without limitation,
manufacturing, financial, logistics, sales, marketing and administrative functions. We depend on our IT infrastructure to communicate
internally and externally with employees, customers, suppliers and others. We also use IT networks and systems to comply with regulatory,
legal and tax requirements. We have outsourced significant elements of our IT infrastructure. As a result, we manage independent vendor
relationships with third-parties who are responsible for maintaining significant elements of our IT systems and infrastructure and who
may or could have access to our confidential information. The size and complexity of our IT systems, and those of our third-party vendors,
make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our
employees, partners or vendors. These systems are also vulnerable to attacks by malicious third parties, such as phishing or ransomware
attacks, and may be susceptible to intentional or accidental physical damage to the infrastructure maintained by us or by third parties,
including, without limitation, as a result of extreme weather events, such as fires, floods, hurricanes or tornadoes or as the result
of the use of AI or other new technologies.
 
Maintaining
the secrecy of confidential, proprietary, and/or trade secret information is important to our competitive business position. We continually
assess these threats and make investments to increase internal protection, detection, and response capabilities, as well as ensure our
third-party providers have required capabilities and controls, to address these risks. Like other public companies, our computer systems
and those of our third-party vendors and service providers are regularly subject to, and will continue to be the target of, computer
viruses, malware or other malicious code (including ransomware), unauthorized access, cyber-attacks or other computer-related penetrations,
which have caused, and may continue to cause, disruptions to our operations. Over time, the sophistication of these threats continues
to increase. Our reliance on unsupported and vulnerable operating systems and other software in certain cases may increase both the likelihood
and potential severity of cyber incidents. The preventative actions we take to reduce the risk of cyber incidents and protect our information
may be insufficient. Our efforts may not prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent
wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination,
or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved
dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a
result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing
products, use our proprietary technology or information, and/or adversely affect our business position. Further, any such interruption,
security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to
us and could have a material adverse effect on our business, financial condition, results of operations, cash flow, ability to operate
and stock price.
 

 23 
 

 
Artificial
intelligence based platforms may present new risks and challenges to our business.
 
AI
technologies may exacerbate existing risks, including risks associated with data privacy, cybersecurity, IP, healthcare fraud and abuse,
drug development and manufacturing, and risks to patients or human subjects in clinical trials. AI also introduces new risks, due to
the autonomous nature of the technology, which, in some cases, may be deployed to perform tasks, inform decisions, automate decisions,
and make predictions. AI may amplify biased and discriminatory decision making, perform unreliably and malfunction, generate insights
which are difficult to interpret and explain, and cause direct harm to individuals or groups.
 
Regulators
are proposing, adopting, and implementing new AI laws and regulations. We may be required to change our business practices and policies
as a result of such laws and regulations and may incur substantial compliance-related costs.
 
Regulators
are also using existing laws and regulations to take enforcement actions related to the deployment of AI in ways that result in non-compliance
with current laws and regulations. If we fail to comply with AI laws and regulations, we may be subject to sanctions, fines, and reputational
damage, orders to stop certain processing of personal data, orders to delete certain data or destroy AI algorithms derived from data
collects, legal action on behalf of impacted individuals or other enforcement or other actions. If we fail to take steps to protect our
confidential data, trade secrets, IP and personal data, we may be subject to legal, regulatory, financial, and reputational risks. AI
technologies present significant opportunities and risks to our business. Harnessing AI’s transformative potential may enable us
to speed up the discovery and development of new drugs, optimize our manufacturing processes, and drive efficiencies. Our failure to
use AI technologies in a way that maintains trust, quality and control in our business activities and to capitalize on opportunities
presented by AI may also place us at a competitive disadvantage. Failure to address AI risks will reduce our ability to deliver strategic
objectives. Also, investments in AI may not realize the benefits that were anticipated.
 
Delays
in generic product development may result in failure to achieve adequate return on investment.
 
The
time necessary to develop generic drugs may adversely affect whether, and the extent to which, we receive a return on our capital. The
development process for generic products, including, without limitation, drug formulation, testing, and FDA review and approval, often
takes three or more years. We must also successfully address any challenges brought by the owner of the listed patent. This process requires
that we expend considerable capital to pursue activities that do not yield an immediate or near-term return. Also, because of the significant
time necessary to develop a product, the actual market for a product at the time it is available for sale may be significantly less than
the originally projected market for the product. If this were to occur, our potential return on our investment in developing the product,
if approved for marketing by the FDA, would be adversely affected and we may never receive a return on our investment in the product.
It is also possible for the manufacturer of the brand-name product for which we are developing a generic drug to obtain approvals from
the FDA to switch the brand-name drug from the prescription market to the OTC market. If this were to occur, we would be prohibited from
marketing our product other than as an OTC drug, in which case revenues could be substantially less than we anticipated.
 
Our
business is dependent on market acceptance of our products, social and political pressures, including public concern over the abuse of opiods.
 
Market
acceptance of our products among physicians, patients, health care payors and the medical community, is a key component of commercial
success and if such is not achieved, our business will be adversely affected. The degree of market acceptance of any of our approved
products among physicians, patients, health care payors and the medical community will depend on a number of factors, including, without
limitation:
 


 
●
Acceptable
    evidence of safety and efficacy;

 
 
 

 
●
Relative
    convenience and ease of administration;

 
 
 

 
●
The
    prevalence and severity of any adverse side effects;

 
 
 

 
●
Availability
    of alternative treatments;

 
 
 

 
●
Pricing
    and cost effectiveness;

 
 
 

 
●
Effectiveness
    of sales and marketing strategies; and,

 
 
 

 
●
Ability
    to obtain sufficient third-party coverage or reimbursement.

 
If
we are unable to achieve market acceptance for our products, then such products will not be commercially successful, and our business
will be adversely affected.
 

 24 
 

 
Some
of these factors are not within our control, and our products may not achieve expected levels of market acceptance. Additionally, continuing
and increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted
by the industry, government agencies and others which can call into question the utilization, safety, and efficacy of previously marketed
products. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk
management programs such as the need for a patient registry.
 
We
may also experience downward pressure on the price of our products due to social or political pressure to lower the cost of drugs, which
would reduce our revenue and future profitability.
 
Public
concern over the abuse of opioid medications, including increased legal and regulatory action, could also negatively affect our business.
Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of opioid medications
in the United States. State and local governmental agencies may investigate us as a manufacturer and/or distributor of medicines containing
opioids or in conjunction with their investigation of other pharmaceutical wholesale distributors, and others in the supply chain that
have a direct or indirect connection to our operations in relation to the distribution of opioid medications. In addition, multiple lawsuits
have been filed against other pharmaceutical manufacturers and distributors alleging, among other claims, that they failed to provide
effective controls and procedures to guard against the diversion of controlled substances, acted negligently by distributing controlled
substances to pharmacies that serve individuals who abuse controlled substances, and failed to report suspicious orders of controlled
substances in accordance with regulations. Additional governmental entities have indicated an intent to sue these other manufacturers
and distributors. While no such actions have been taken against us, the immediate effect on the Company has been an inability to commercialize
and market three opioid products approved during fiscal years prior to the twelve months ended March 31, 2021 and a cessation of orders
for another two other opioid products that had been marketed by our marketing partners. During the year ended March 31, 2020, we disposed
of four approved ANDAs for opioid products. As of March 31, 2024, we continue to hold one approved ANDA for an opioid product that, while
approved by the FDA, has not been launched commercially. Subsequent to March 31, 2024, the Company acquired three approved ANDAs for
opioid products, and plans on commercially launching these three products, in addition to the one approved ANDA for an opioid product
previously held within a timeframe that is beneficial to the Company’s interests. Further, defense against any such opioid related
lawsuits could be cost-prohibitive resulting in an adverse material effect on our business, financial condition, results of operations,
cash flows and stock price. Similar allegations made against us, even without litigation, could also negatively affect our business in
various ways, including through increased costs and harm to our reputation. In addition, an adverse resolution of any lawsuit or investigation
could also have a material adverse effect on our business, results of operations, cash flows and stock price.
 
Market
perceptions of our business are important to us, especially market perceptions of the safety and quality of our products. If any of our
products or similar products that other companies distribute are subject to market withdrawal, recall, or are proven to be, or are claimed
to be, harmful to consumers, then this could have a material adverse effect on our business, results of operations, financial condition,
and cash flows. Furthermore, due to the importance of market perceptions, negative publicity associated with product quality, illness
or other adverse effects resulting from, or perceived to be resulting from, our products, or similar products made by other companies,
could have a material adverse effect on our business, results of operations, financial condition, and cash flows.
 
Any
or all of the above could result in a material adverse effect on our business, financial condition, results of operations, cash flow,
ability to operate and stock price.
 
Unstable
economic conditions may adversely affect our business.
 
The
global economy has undergone a period of significant volatility, which has led to diminished credit availability, declines in consumer
confidence, and increases in unemployment rates. There remains caution about the stability of the U.S. economy, and we cannot assure
that further deterioration in the financial markets will not occur. These economic conditions have resulted in, and could lead to further,
reduced consumer spending related to healthcare in general and pharmaceutical products in particular.
 
In
addition, we have exposure to many different industries and counterparties, including our partners under our alliance and collaboration
agreements, suppliers of raw chemical materials, drug wholesalers and other customers that may be affected by an unstable economic environment.
Any economic instability may affect these parties’ ability to fulfil their respective contractual obligations to us, cause them
to limit or place burdensome conditions upon future transactions with us or drive us and our competitors to decrease prices, each of
which could materially and adversely affect our business, results of operations and financial condition, cash flows and stock price.
 
We
depend on qualified scientific and technical personnel and our ability to attract and retain such personnel.
 
Because
of the specialized scientific nature of our business, we are highly dependent upon our ability to continue to attract and retain qualified
scientific and technical personnel. We are not aware of any pending, significant losses of scientific or technical personnel. Loss of
the services of, or failure to recruit, key scientific and technical personnel, however, would be significantly detrimental to our product-development
programs. As a result of our small size and limited financial and other resources, it may be difficult for us to attract and retain qualified
officers and qualified scientific and technical personnel.
 

 25 
 

 
In
addition, marketing of our branded product, SequestOx™, if approved, will require much greater use of a direct sales force compared
to marketing of our generic products, should we reinstate development and successfully commercialize this product. Our ability to realize
significant revenues from marketing and sales activities depends on our ability or the ability of our partners to attract and retain
qualified sales personnel. Competition for qualified sales personnel is intense. Any failure to attract or retain qualified sales personnel
could negatively impact our sales revenue and have a material adverse effect on our business, results of operations, financial condition,
cash flows and stock price.
 
We
have entered into employment agreements with our executive officers and certain other key employees. We do not maintain “Key
Man” life insurance on any executives.
 
Unsuccessful
collaboration or licensing arrangements could limit revenues and product development.
 
We
have entered into several collaborations and licensing arrangements for the development of products. However, there can be no assurance
that any of these agreements will result in FDA approvals, or that we will be able to market any such products, if approved, at a profit.
Collaboration and licensing arrangements pose the following risks:
 


 
●
Collaborations
    and licensing arrangements may be terminated, in which case we will experience increased operating expenses and capital requirements
    if we elect to pursue further development of the related product candidate;

 
 
 

 
●
Collaborators
    and licensees may delay clinical trials and prolong clinical development, under-fund a clinical trial program, stop a clinical trial,
    or abandon a product candidate;

 
 
 

 
●
Expected
    revenue might not be generated because milestones may not be achieved, and product candidates may not be developed;

 
 
 

 
●
Collaborators
    and licensees could independently develop, or develop with third parties, products that could compete with our future products;

 
 
 

 
●
The
    terms of our contracts with current or future collaborators and licensees may not be favorable to us in the future;

 
 
 

 
●
A
    collaborator or licensee with marketing and distribution rights to one or more of our products may not commit enough resources to
    the marketing and distribution of our products, limiting our potential revenues from the commercialization of a product;

 
 
 

 
●
Disputes
    may arise delaying or terminating the research, development, or commercialization of our product candidates, or result in significant
    and costly litigation or arbitration; and,

 
 
 

 
●
One
    or more third-party developers could obtain approval for a similar product prior to the collaborator or licensee resulting in unforeseen
    price competition in connection with the development product.

 
Any
or all of the above could result in a material adverse effect on our business, financial condition, results of operations, cash flow,
ability to operate and stock price.
 
A
substantial portion of our total revenues is expected to be derived from sales of a limited number of products to a limited number of
customers.
 
We
expect that we will continue to derive a substantial portion of our revenue from sales of a limited number of products. For the twelve
months ended March 31, 2024, our significant product families (defined as the top four products based on active pharmaceutical ingredient)
accounted for in excess of 90% of allocated revenues (defined as gross revenues less chargebacks and government rebates processed). The
sale of our products may be significantly influenced by market conditions, as well as regulatory actions. We may experience decreases
in the sale of our products in the future as a result of actions taken by our competitors, such as price reductions, or as a result of
regulatory actions, such as changes in quota, related to our products or to competing products, which could result in a material adverse
on our business, financial condition, results of operations, cash flow, ability to operate and stock price.
 
We
also expect that we will continue to derive a substantial portion of our revenue from sales to a limited number of customers. For the
twelve months ended March 31, 2024, our six largest customers accounted for in excess of 80% of revenues. The loss of any one or more
of these customers, without replacement by a customer of similar significance, or the substantial reduction in orders from any one or
more of these customers, without replacement of orders of a similar magnitude from other customers, could result in a material adverse
on our business, financial condition, results of operations, cash flow, ability to operate and stock price.
 

 26 
 

 
We
depend to a large extent on third-party suppliers and distributors for the raw materials for our products, particularly the chemical
compounds comprising the active pharmaceutical ingredients (“API’s”) that we use to manufacture our products, as well
as for certain finished goods.
 
We
purchase the bulk of the raw materials essential to our manufacturing business from third parties. If we experience supply interruptions
or delays, or if a supplier discontinues the sale of certain products, we may have to obtain substitute materials or products, which
in turn would require us to obtain amended or additional regulatory approvals, subjecting us to additional expenditures of significant
time and resources. In addition, changes in our raw material suppliers could result in significant delays in production, higher raw material
costs and loss of sales and customers, because regulatory authorities must generally approve raw material sources for pharmaceutical
products, which may be time consuming. For example, it may take as long as 18 months to find and qualify a new sole-source supplier.
If we receive less than one year’s termination notice from a sole-source supplier that intends to cease supplying raw materials,
it could result in disruption of our ability to produce the drug involved. Any significant interruption could result in a material adverse
on our business, financial condition, results of operations, cash flow, ability to operate and stock price.
 
We
issue price adjustments and other sales allowances to our customers. Although we may establish reserves based on our estimates of these
amounts, if estimates are incorrect and the reserves are inadequate, it may result in adjustments to these liabilities that may have
a material adverse effect on our financial position and results of operations.
 
Based
on estimates, we establish liabilities for sales allowances, including, without limitation, sales discounts, returns, chargebacks, sales
volume rebates, shelf stocks, cash discounts and Medicaid rebate obligations at each reporting period. Although we believe our liabilities
are adequate as of the date of this report, there can be no assurances given by us that our reserves will ultimately prove to be adequate.
Increases in such sales allowances may exceed our estimates for a variety of reasons, including, without limitation, unanticipated competition,
an unexpected change in one or more contractual relationships or changes in ratios in contractual sales volumes as compared to historical
ratios. We will continue to evaluate the relevant factors upon which our estimates and reserves are calculated and record appropriate
adjustments if and when deemed necessary. Any failure to establish adequate liabilities with respect to these sales allowances could
result in a material adverse effect on our business, financial position, results of operations, cash flows, ability to operate and cash
flows.
 
Financial
and Liquidity Risks
 
We
have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect
our ability to report our financial condition, cash flows and results of operations in a timely and fairly stated manner and/or increase
the risk of future misstatements, which could have a material adverse effect on our business, financial condition, cash flows and results
of operations and could cause the market value of our common shares and/or debt securities to decline.
 
Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule
13a-15(f) under the Exchange Act. Based on reviews conducted by management and specific guidance from third party subject matter experts
engaged by the Company, we have concluded that material weaknesses in the Company’s internal controls over financial reporting
existed. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
 
The
Company has identified certain remediation actions and is in the process of implementing them, but such efforts are not complete, most
likely require the retention of additional personnel or consultants, both of which are further subject to the Company’s financial
condition and financial ability to retain such resources. Although no material misstatement of historical financial statements was identified,
if we are unable to complete our remediation in a timely manner or if our remedial measures are insufficient to address the material
weaknesses, or if additional material weaknesses in our internal controls are discovered or occur in the future, it may adversely affect
our ability to report our financial condition and results of operations in a timely and accurate manner and there will continue to be
an increased risk of future misstatements. In our periodic review and evaluation of internal control systems to allow management to assess
the effectiveness of our internal controls over financial reporting, we may discover additional weaknesses in our internal controls over
financial reporting or disclosure controls and procedures. The next time we evaluate our internal controls over financial reporting and
disclosure controls and procedures, if we identify one or more new material weaknesses or have been unable to timely remediate our existing
material weaknesses, we would be unable to conclude that our internal controls over financial reporting or disclosure controls and procedures
are effective. If we are unable to conclude that our internal controls over financial reporting or our disclosure controls and procedures
are effective or, if required to issue such an opinion, our independent registered public accounting firm expresses an opinion that our
internal controls over financial reporting is ineffective, we may not be able to report our financial condition and results of operations
in a timely and accurate manner, which could have a material adverse effect on our business, financial condition, cash flows and results
of operations and could cause the market value of our common shares to decline. In addition, any potential future restatements could
subject us to additional adverse consequences, including sanctions by the SEC, shareholder litigation and other adverse actions. Moreover,
we may be the subject of further negative publicity focusing on such financial statement adjustments and resulting restatement and negative
reactions from our shareholders, creditors or others with whom we do business. The occurrence of any of the foregoing could have a material
adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common
shares to decline. Please see Item 9A “Controls and Procedures” in Part II.
 

 27 
 

 
We
have a relatively limited operating history and our operating results could fluctuate significantly.
 
Our
revenues and operating results may vary significantly from year-to-year and quarter-to-quarter as well as in comparison to the corresponding
quarter of the preceding year. Variations may result from one or more factors, including, without limitation:
 


 
●
Timing
    of approval of applications filed with the FDA;

 
 
 

 
●
Timing
    of process validation, product launches and market acceptance of products launched;

 
 
 

 
●
Changes
    in the amounts spent to research, develop, acquire, license or promote new and existing products;

 
 
 

 
●
Results
    of clinical trial programs;

 
 
 

 
●
Serious
    or unexpected health or safety concerns with our products, brand products which we have genericized, products currently under development
    or any other product candidates;

 
 
 

 
●
Introduction
    of new products by others that render our products obsolete or non-competitive;

 
 
 

 
●
The
    ability to maintain selling prices and gross margin on our products;

 
 
 

 
●
Mix
    of product manufactured and sold due to each product having different gross margins;

 
 
 

 
●
The
    cost and outcome of litigation, in the event that such occurs in relation to, without limitation, intellectual property issues, regulatory
    or other matters;

 
 
 

 
●
The
    ability to comply with complex and numerous governmental regulations and regulatory authorities which oversee and regulate many aspects
    of our business and operations;

 
 
 

 
●
Changes
    in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid, and similar
    state programs, especially in relation to those products that are currently manufactured, under development or identified for future
    development by the Company;

 
 
 

 
●
Increases
    in the cost of raw materials contained within our products;

 
 
 

 
●
Manufacturing
    and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications;

 
 
 

 
●
Timing
    of revenue recognition relating to our licensing and other agreements;

 
 
 

 
●
The
    ability to avoid infringing the intellectual property of others;

 
 
 

 
●
The
    ability to protect our intellectual property from being acquired by other entities;

 
 
 

 
●
Our
    ability to manage growth and integrate acquired products and assets successfully; and

 
 
 

 
●
The
    addition or loss of customers.

 
A
negative variation in one, many or all of the above factors could, may or will have a material adverse effect on Elite’s business,
results of operations, financial condition, and cash flow and ability to operate in the future, depending on the nature and magnitude
of the variation(s).
 
In
addition, although we have been in operation since 1990, we have a relatively short operating history, have only achieved profitability
for the first time during the fiscal year ended March 31, 2021 and limited financial data upon which you may evaluate our business and
prospects. There can be no assurances of our ability to sustain current profitability. Additionally, in certain years prior to the year
ended March 31, 2021, the auditor’s opinion on our financials was qualified with respect to there being substantial doubt as to
the Company’s ability to continue as a going concern due to continued losses not being sufficiently offset by operating revenues.
A failure to generate sufficient revenues to offset related costs of operations will have a material adverse effect on our business,
results of operations, financial condition, cash flow and ability to operate.
 
Furthermore,
our business model is likely to continue to evolve as we attempt to expand our product offerings and our presence in the generic pharmaceutical
market. As a result, our potential for future profitability must be considered in view of the risks, uncertainties, expenses, and difficulties
frequently encountered by companies that are attempting to move into new markets and continuing to innovate with new and unproven technologies.
Some of these risks relate to our potential inability to:
 


 
●
Develop
    new products;

 
 
 

 
●
Obtain
    regulatory approval of our products;

 

 28 
 

 


 
●
Manage
    our growth, control expenditures and align costs with revenues;

 
 
 

 
●
Attract,
    retain, and motivate qualified personnel; and respond to competitive developments.

 
If
we do not effectively address the risks we face, our business model may become unworkable and we may not achieve or sustain profitability
or successfully develop any products, resulting in a material adverse effect on Elite’s business, results of operations, financial
condition, and cash flow and ability to operate in the future.
 
Our
ability to fund operations is uncertain and we may require additional financing to meet objectives.
 
Our
ability to fund our operations, maintain liquidity and meet our financing obligations is reliant on our operations, which are subject
to significant risks and uncertainties. We rely on cash generated by operations as well as access to financial markets and equipment
financings, to fund our commercial, product development and other operations, maintain liquidity and meet our financial obligations.
There can be no assurances of our ability to secure equipment financing, resulting in an increased risk of our inability to achieve critical
or necessary facility upgrades.
 
Our
operations are also subject to many significant risks and uncertainties, as described, without limitation, in this “Risk Factors”
section, including, without limitation, competition in the markets in which we operate, litigation risks, government investigations,
including those related to our sale, marketing and/or distribution of prescription opioid medications in prior periods, and others. Any
negative development or outcome in connection with any or all of these risks and uncertainties could result in significant consequences,
including, without limitation, one or more of the following:
 


 
●
The
    dedication of a substantial portion of our cash flows from operations to the payment of legal or related expenses, resulting in these
    same funds being unavailable for other purposes, including, without limitation, debt service, operations, capital expenditures, product
    development and future business opportunities;

 
 
 

 
●
A
    limitation in our ability to adjust to changing market conditions, causing us to be more vulnerable to periods of negative or impaired
    growth in the general economy or in our business, resulting the company being put at a competitive disadvantage as a result of a
    decreased or unavailable ability to engage in capital spending and take all other actions that would otherwise be required to ensure
    growth and competitiveness;

 
 
 

 
●
A
    limitation in our ability to attract and retain key personnel;

 
 
 

 
●
A
    decrement in our debt service and compliance obligations related to certain of our outstanding debt obligations, exposing us to events
    of default and reduced credit ratings, which in turn lead to increased capital costs and potential unavailability of capital; and,

 
 
 

 
●
An
    overall inability to fund our operations and liquidity needs.

 
The
occurrence or possibility of one or more of these or similar events may cause us to pursue one or more significant corporate transactions
as well as other remedial measures, including refinancing all or part of our then-existing indebtedness, selling assets, reducing, delaying
or eliminating capital expenditures, seeking to raise additional capital or pursuing internal reorganizations, restructuring activities,
strategic alliances, or cost-saving initiatives. Any refinancing of our substantial indebtedness could be at significantly higher interest
rates, which will depend on both the conditions of the market as well as the Company’s finances at such time, and may also require
our compliance with covenants that could be more onerous than current, which in turn could result in the further restriction of our business
operations. Any refinancing may also increase the amount of our secured indebtedness. In addition, the terms of existing or future debt
agreements may restrict us from adopting any of the alternatives. Internal reorganizations, restructuring activities, asset sales and
cost saving initiatives may also be complex and could entail significant costs and charges or could otherwise negatively impact shareholder
value. There can also be no assurance that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all,
or that even if accomplished, that the intended results and benefits would be realized.
 
We
most likely will require additional financing to meet our business objectives.
 
We
most likely will need additional funding to accomplish our plans to conduct the clinical development and commercialization of a range
of multiple abuse deterrent opioids or initiate, continue or complete the development of additional generic products already identified
for development or currently in development.
 
As
of March 31, 2024, we had cash on hand of approximately $7.1 million and a working capital surplus of $27.0 million, as of March 31,
2024, we generated income from operations totaling $10.8 million, net other expenses totaling $10.3 million and a net tax benefit of
$19.6 million, resulting in net income of $20.1 million.
 

 29 
 

 
While
growth in our current generic product line, consisting of Phentermine Tablets, Phentermine Capsules, Phendimetrazine Tablets, Naltrexone
Tablets, Isradipine Capsules, Trimipramine Capsules, Loxapine capsules, Amphetamine IR Tablets, Amphetamine ER Capsules and Dantrolene
Capsules, and successful commercialization of other products in our product development pipeline, may lead to increased profitability,
there can be no assurances of Elite increasing profits or achieving profitable operations in the future. Furthermore, there can be no
assurances of the continuation of revenues being earned from the current generic product line, no assurances of Elite’s successful
commercialization of other products in our development pipeline.
In addition, there can be no assurances of Elite being able to raise additional funds in a timely manner, on acceptable terms, if needed
to support commercial operations resulting in a material detrimental effect on Elite’s operations and profits as well as having a material adverse
effect on our business, results of operations, financial condition, and cash flow and ability to operate in the future.
 
To
sustain operations and meet our business objectives we must be able to commercialize our products and other products or pipeline opportunities.
If we are unable to timely obtain additional financing, if necessary, and/or we are unable to timely generate greater revenues from our
operations, we will be required to reduce and, possibly, cease operations and liquidate our assets. No assurance can be given that we
will be able to commercialize the new opportunities or consummate such other financing or strategic alternative in the time necessary
to avoid the cessation of our operations and liquidation of our assets.
 
Furthermore,
the capital and credit markets have experienced extreme volatility. Disruptions in the credit markets make it harder and more expensive
to obtain funding. In the event current resources do not satisfy our needs, we may have to seek additional financing. The availability
of additional financing will depend on a variety of factors such as market conditions and the general availability of credit. Future
debt financing may not be available to us when required or may not be available on acceptable terms, and as a result we may be unable
to grow our business, take advantage of business opportunities, or respond to competitive pressures..
 
We
have substantial indebtedness which may adversely affect our financial condition.
 
We
currently have substantial indebtedness. Total liabilities as of March 31, 2024, were $26.1 million, with such amount including, without
limitation, $11.7 million in various loans, leases, bonds payable and deferred revenues, $6.3 million in derivative liabilities and $8.0
million in current payables and accruals. The consequences of this substantial indebtedness could include:
 


 
●
Exposure
    to the risk of increased interest rates;

 
 
 

 
●
The
    Company being required to dedicate a substantial portion of cash flow from operations for debt service and the attendant result of
    a diminished ability to fund working capital, capital expenditures and other expenses;

 
 
 

 
●
A
    limitation in our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 
 
 

 
●
Our
    being at a competitive disadvantage as compared to competitors with less indebtedness; and

 
 
 

 
●
A
    limitation in our ability to borrow additional funds that may be needed to operate and expand our business.

 
In
addition, a notice of default was issued by the New Jersey Economic Development Authority in relation to prior obligations of our tax-exempt
bonds. Although we are current in our payments under these bonds, if the principal balances due under these bonds are accelerated pursuant
to the notice of default, our ability to operate in the future will be materially and adversely affected.
 
For
more information on the NJEDA Bonds, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition
and Results of Operations; Liquidity and Capital Resources; NJEDA Bonds”.
 
There
is a risk of impairment of significant intangible assets on our balance sheet.
 
We
have significant intangible assets on our balance sheet. Consequently, potential impairment of intangible assets may have an adverse
material effect on our profitability.
 
Intangible
assets represent a significant portion of our assets. As of March 31, 2024, intangible assets were approximately $6.3 million, or approximately
8% of our assets.
 
Generally
accepted accounting principles in the United States (“GAAP”) requires that intangible assets be subject to regular impairment
analysis to determine if changes in circumstances indicate that the value of the asset as recorded may not be recoverable. Such events
or changes in circumstances are an inherent risk in the pharmaceutical industry and often cannot be predicted. However, should a change
in circumstance occur, requiring the impairment of an intangible asset, the result of such an impairment may have an adverse material
effect on our business, financial condition, results of operations, cash flows and stock price. During the year ended March 31, 2023,
we determined that circumstances indicated that the value of our intangible assets may not be recoverable. During the years ended March
31, 2024 and 2023, we recorded impairment of approximately $0.0 million, and $0.3 million respectively, of our ANDA and patent intangible
assets.
 

 30 
 

 
GAAP
requires estimates, judgements and assumptions which inherently contain uncertainties.
 
There
are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance
with GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates, judgments or assumptions
could lead to a restatement of our results.
 
The
consolidated financial statements included in this Annual Report on Form 10-K are prepared in accordance with GAAP. This involves making
estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities, mezzanine equity,
stockholders’ equity, operating revenues, costs of sales, operating expenses, other income, and other expenses. Estimates, judgments,
and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions
could lead to a restatement. Any such changes could result in corresponding changes to the amounts of assets (including goodwill and
other intangible assets), liabilities, mezzanine equity, stockholders’ equity, operating revenues, costs of sales, operating expenses,
other income and other expenses.
 
Legal
and Regulatory Risks
 
The
pharmaceutical industry is heavily regulated which creates uncertainty and substantial compliance costs.
 
The
pharmaceutical industry is heavily regulated, which creates uncertainty about our ability to bring new products to market and imposes
substantial compliance costs on our business in relation to product development as well as commercial operations.
 
Governmental
authorities such as the FDA impose substantial requirements on the development, manufacture, holding, labelling, marketing, advertising,
promotion, distribution and sale of therapeutic pharmaceutical products through lengthy and detailed laboratory and clinical testing
and other costly and time-consuming procedures. In addition, before obtaining regulatory approvals for certain generic products, we must
conduct limited bioequivalence studies and other research to show comparability to the branded products. A failure to obtain satisfactory
results in required pre-marketing trials may prevent us from obtaining required regulatory approvals. The FDA may also require companies
to conduct post-approval studies and companies are subject to post-approval surveillance regarding their drug products and to report
adverse events. The FDA also can require companies to formulate approved Risk Evaluation and Mitigation Strategies (REMS) to help ensure
that a drug’s benefits outweigh its risks.
 
We
may seek FDA approval for certain product candidates through the 505(b)(2) regulatory pathway. Even if we receive approval for an NDA
under Section 505(b)(2), the FDA may not take timely enforcement action against companies marketing unapproved versions of the drug;
therefore, we cannot be sure that that we will receive the benefit of any de facto exclusive marketing period or that we will fully recoup
the expenses incurred to obtain an approval. In addition, certain competitors and others have objected to the FDA’s interpretation
of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, this could delay or even prevent
the FDA from approving any NDA that we submit under Section 505(b)(2).
 
Moreover,
even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses
for which the products may be marketed or to other conditions of approval or may contain requirements for costly post-marketing testing
and surveillance to monitor the safety or efficacy of the products.
 
The
ANDA approval process for a new product varies in time, is difficult to estimate and can vary significantly, from as little as 10 months
from the date of application, to several years or more. Furthermore, ANDA approvals, if granted, may not include all indications for
which the Company may seek to market each product.
 
Further,
once a product is approved or cleared for marketing, failure to comply with applicable regulatory requirements can result in, among other
things, suspensions or withdrawals of approvals or clearances, seizures or recalls of products, injunctions against the manufacture,
holding, distribution, marketing and sale of a product, and civil and criminal sanctions. Furthermore, changes in existing regulations
or the adoption of new regulations could prevent us from obtaining, or affect the timing of, future regulatory approvals or clearances.
Meeting regulatory requirements and evolving government standards may delay marketing of our new products for a considerable period of
time, impose costly procedures upon our activities and result in a competitive advantage to larger companies that compete against us.
 
Even
if regulatory approval is obtained for a particular product candidate, the FDA and foreign regulatory authorities may, nevertheless,
impose significant restrictions on the indicated uses or marketing of such products, or impose ongoing requirements for post-approval
studies. Following any regulatory approval of our product candidates, we will be subject to continuing regulatory obligations, such as
safety reporting requirements, and additional post-marketing obligations, including regulatory oversight of the promotion and marketing
of our products. If we become aware of previously unknown problems with any of our product candidates here or overseas or at our contract
manufacturers’ facilities, a regulatory agency may impose restrictions on our products, our contract manufacturers or on us, including
requiring us to reformulate our products, conduct additional clinical trials, make changes in the labelling of our products, implement
changes to or obtain re-approvals of our contract manufacturers’ facilities or withdraw the product from the market. In addition,
we may experience a significant drop in the sales of the affected products, our reputation in the marketplace may suffer and we may become
the target of lawsuits, including class action suits. Moreover, if we fail to comply with applicable regulatory requirements, we may
be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions,
and criminal prosecution. Any of these events could harm or prevent sales of the affected products or could substantially increase the
costs and expenses of commercializing and marketing these products.
 

 31 
 

 
Compliance
with federal and state and local law regulations, including compliance with any newly enacted regulations, requires substantial expenditures
of time, money, and effort to ensure full compliance. Failure to comply with the FDA, DEA, EPA and other governmental regulations can
result in fines, disgorgement, unanticipated compliance expenditures, recall or seizure of products, exposure to product liability claims,
total or partial suspension of production or distribution, suspension of the FDA’s review of NDAs or ANDAs, enforcement actions,
injunctions and civil or criminal prosecution, any of which could have a material and adverse effect on our business, results of operations
and financial condition.
 
Our
business may be adversely affected by legislation or healthcare regulatory reform and initiatives.
 
Our
business and financial condition may be adversely affected by legislation or regulatory reform of the healthcare system in the United
States. We cannot predict with any certainty how existing laws may be applied or how laws or legal standards may change in the future.
Current or future legislation, whether state or federal, or in any of the non-U.S. jurisdictions with authority over our suppliers, customers
or operations, may have a material effect on our business, ability to operate, financial condition, results of operations and cash flows.
 
Employers
may seek to reduce costs by reducing or eliminating employer group healthcare plans or by transferring a greater portion of their healthcare
costs to their employees. Job losses, or other economic hardships may also result in reduced levels of coverage for some individuals,
potentially resulting in lower healthcare coverage for themselves or their families. Furthermore, increased instability in the insurance
marketplace or an increase in uninsured Americans or others living and working in the USA may result from the Tax Cuts and Jobs Act of
2017, elimination of the Tax Cuts and Jobs Act of 2017, elimination of the Patient Protection and Affordable Care Act (PPACA)’s
requirement that individuals maintain health insurance or incur a financial penalty and other steps taken by various governmental and
other organizations to limit or end subsidies to such individuals at comparatively lower income levels. These economic conditions may
affect an individual’s ability to afford healthcare as a result of increased premiums, co-pay or deductible obligations, greater
cost sensitivity to existing co-pay or deductible obligations, lost healthcare coverage or for other reasons. It is possible that such
conditions could lead to changes in patient behavior and spending patterns that could negatively affect prescription and usage of certain
or all of our products, including, without limitation, delaying of treatment, rationing of prescription medications, non-filling of prescriptions,
reduction in the frequency of visits to healthcare facilities, utilizing alternative therapies or foregoing healthcare insurance coverage
altogether. Such changes may result in the reduced demand for any or all of our products, which could have a material adverse effect
on our business, results of operations, financial condition, cash flows and ability to operate as a going concern.
 
Furthermore,
our ability to commercialize and generate revenues and profit splits relating to the sale of our products depends, in part, on the extent
to which reimbursement for the costs of these products is available from third-party payors, including government healthcare programs,
such as Medicaid and Medicare, private health insurers and other payors. We cannot be certain that, over time, third party reimbursements
for our products will be adequate for us to maintain price levels sufficient for realization of an appropriate return on our investment.
Government payers, private insurers and other third party payers are increasingly attempting to contain healthcare costs by: (i) limiting
both coverage and the level of reimbursement (including adjusting co-pays) for drugs, (ii) refusing, in some cases, to provide any coverage
for certain uses for drugs, (iii) requiring rebates, in the case of government healthcare programs, for net sales amounts above statutorily
defined ceilings, with such ceilings being potentially below production costs and (iv) requiring or encouraging, through more favorable
reimbursement levels or otherwise, the substitution of generic alternatives to branded drugs. For example, government agencies or third-party
payers could attempt to reduce reimbursement for physician administered products through their interpretation of complex government price
reporting obligations and payment and reimbursement coding rules, and could attempt to reduce reimbursement for separate physician administered
products that share an active ingredient by requiring the blending of sales and pricing information in the same payment and reimbursement
code.
 
The
unavailability of, or reduction in, the reimbursement of our products could have a material adverse effect on our business, ability to
operate as a going concern, financial condition, results of operations and cash flow.
 
Use
of generics may be limited through legislative, regulatory or efforts of pharmaceutical companies.
 
Many
pharmaceutical companies increasingly have used state and federal legislative and regulatory means to delay generic competition, which,
if successful, could limit the use of generic pharmaceuticals. These efforts have included:
 


 
●
Pursuing
    new patents for existing products which may be granted just before the expiration of earlier patents, which could extend patent protection
    for additional years;

 
 
 

 
●
Using
    the Citizen Petition process (for example, under 21 C.F.R. s. 10.30) to request amendments to FDA standards;

 

 32 
 

 


 
●
Attempting
    to use the legislative and regulatory process to have drugs reclassified or rescheduled or to set definitions of abuse-deterrent
    formulations to protect patents and profits; and

 
 
 

 
●
Engaging
    in state-by-state initiatives to enact legislation that restricts the substitution of some generic drugs.

 
 
 

 
●
Seeking
    changes to U.S. Pharmacopeia, an organization that publishes industry recognized compendia of drug standards;

 
 
 

 
●
Attaching
    patent extension amendments to non-related federal legislation;

 
 
 

 
●
Persuading
    regulatory bodies to withdraw the approval of brand-name drugs for which the patents are about to expire and converting the market
    to another product of the brand company on which longer patent protection exists;

 
 
 

 
●
Entering
    into agreements whereby other generic companies will begin to market an authorized generic at the same time or after generic competition
    initially enters the market;

 
 
 

 
●
Filing
    suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture and/or scale of generic
    products; and,

 
 
 

 
●
Introducing
    “next generation” products prior to the expiration of market exclusivity for the reference product, which often materially
    reduces demand for the generic or the reference product for which we seek regulatory approval for a generic equivalent.

 
If
pharmaceutical companies or other third parties are successful in limiting the use of generic products through these or other means,
our sales of generic products and our growth prospects may decline. A material decline in generic product sales will have a material
adverse effect on our results of operations, financial condition, cash flows and our ability to operate.
 
Our
revenues and profits from generic products may decline as a result of changes in regulatory policy.
 
The IRA contains substantial drug pricing reforms, including the establishment of a drug
price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge a negotiated
“maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment
requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation,
and requires manufacturers to provide discounts on Part D drugs. Substantial penalties can be assessed for noncompliance with the drug
pricing provisions.
 
Drugs
with an available generic or biosimilar, certain drugs that represent a limited portion of Medicare program spending, drugs with an orphan
designation as their only FDA approved indication, and all plasma-derived products are exempt from direct negotiation. The number of
negotiated products will be phased in between 2026 and 2029, and the law sets a maximum fair price the manufacturer can charge based
on the number of years the product has been on the market. The law allows HHS to levy an excise and civil monetary penalties against
non-compliant manufacturers or those who refuse to negotiate.
 
The
IRA also imposes rebate requirements on manufacturers of single-source generics and other drugs covered under Medicare Part B and Part
D where the price of the drug increases faster than inflation. Multisource generics and all products with an average manufacturer’s
price less than $100 per year, per individual, are exempt from rebate requirements. Beginning on October 1, 2022 for Part D products
and on January 1, 2023 for Part B products, CMS will monitor for products with price increases higher than the rate of inflation on a
quarterly basis. Rebates will be calculated as the total number of units sold by the amount the product exceeds the inflation-adjusted
price, with 2021 as the base year to measure cumulative changes relative to inflation. Noncompliant manufacturers will be subject to
a civil monetary penalty of at least 125% of the calculated rebate amount.
 
The
effect of the IRA on our business, generic manufacturers, and the pharmaceutical industry in general is not
yet known.
 
New
tariffs and evolving trade policy between the US and other countries may adversely affect our business.
 
New
tariffs and evolving trade policy between the United States and other countries, including China and Mexico, may have an adverse effect
on our sourcing of critical raw materials from suppliers located outside of the United States and corresponding adverse effects on our
business and results of operations.
 
Some
of our suppliers, including those of critical active pharmaceutical ingredients are located outside of the United States. There is uncertainty
about the future relationship between the U.S. and various other countries, including China, with respect to trade policies, treaties,
government regulations and tariffs.
 

 33 
 

 
Changes
could potentially disrupt our existing supply chains and impose additional costs on our business, including costs with respect to raw
materials upon which our business depends. Furthermore, if tariffs, trade restrictions or trade barriers are placed on products such
as ours by foreign governments, it could cause us to raise prices for our products, which may result in the loss of customers. If we
are unable to pass along increased costs to our customers, our margins could be adversely affected. Additionally, it is possible that
further tariffs may be imposed that could affect imports of APIs and other materials used in our products, or our business may be adversely
impacted by retaliatory trade measures taken by other countries, including restricted access to APIs or other materials used in our products,
causing us to raise prices or make changes to our products. Further, the continued threats of tariffs, trade restrictions and trade barriers
could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales. Given the volatility and
uncertainty regarding the scope and duration of these tariffs and other aspects of U.S. international trade policy, the impact on our
operations and results is uncertain and could be significant. Further governmental action related to tariffs, additional taxes, regulatory
changes or other retaliatory trade measures could occur in the future. Any of these factors could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
 
The
DEA could limit the availability of active ingredients used in many of our products.
 
The
DEA limits the availability of the active ingredients used in many of our current products and products in development, as well as the
production and distribution of these products, and, as a result, our procurement, production, and distribution quotas may not be sufficient
to meet commercial demand or complete clinical trials.
 
The
DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest
risk of substance abuse and Schedule V substances the lowest risk. The active ingredients in some of our current products and products
in development, including, without limitation, hydromorphone, methadone, phentermine, phendimetrazine and oxycodone, are listed by the
DEA as Scheduled substances under the Controlled Substances Act of 1970. Consequently, their manufacture, shipment, storage, sale, and
use are subject to a high degree of regulation. Furthermore, the DEA limits the availability of the active ingredients used in many of
our current products and products in development and we and/or our contract customers and suppliers, must annually apply to the DEA for
procurement quotas in order to obtain and distribute these substances. As a result, our procurement and production quotas may not be
sufficient to meet commercial demand or to complete any clinical trials we may conduct. Moreover, the DEA may adjust these quotas from
time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Any delay or refusal
by the DEA in establishing our quotas, or modification of our quotas, for controlled substances could delay or result in the stoppage
of our clinical trials or product launches or could cause trade inventory disruptions for those products that already been launched,
which could have a material adverse effect on our business, financial position, cash flows and stock price.
 
We
received a CRL from the FDA indicating that the SequestOx™ NDA is not ready for approval.
 
We
received a Complete Response Letter from the FDA that indicated that our SequestOx™ NDA is not ready for approval in its present
form. We have paused further development of this product and we cannot assure that development will restart. If we are unable to obtain
approval for SequestOx™ or if we incur significant costs or delays in obtaining such approval, our return on investment in SequestOx™
will be materially adversely affected.
 
In
July 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review cycle for the SequestOx™
NDA is complete and the application is not ready for approval in its present form. On December 21, 2016, we met with the FDA for an end-of-review
meeting to discuss steps that we could take to obtain approval of SequestOx™. Based on the FDA response, we believe there is a
path forward to address the issues cited in the CRL, with such path forward including modification of the SequestOx™ formulation,
and the successful completion of in vitro and in vivo studies. If we are unable to modify the formulation or if we are unable to successfully
complete the required studies, we will not meet the requirements specified by the FDA for resubmission of the NDA. Furthermore, there
can be no assurances given that the FDA will eventually approve our NDA. If we are unable to obtain approval for SequestOx™, we
will be unable to commercialize the product. Furthermore, in the event that the Company does receive marketing approval for SequestOx™,
there can be no assurances of the Company realizing future revenues or profits related to this product, or that any such future revenues
and profits would be in amounts that provide adequate return on the significant investments made to secure this marketing authorization.
The Company has currently paused further development of SequestOx™ due to the prohibitive cost of such and attendant risks related
thereto.
 
Regulatory
factors may cause us to be unable to manufacture products or face interruptions in our manufacturing process.
 
Our
manufacturing operations as well as our suppliers’ manufacturing operations are subject to establishment registration by the FDA
and periodic inspections by the FDA to assure compliance regarding the manufacturing of our products. If we or our suppliers do not maintain
the current registrations or if we or our partners receive notices of manufacturing and quality-related observations following inspections
by the FDA, our operating results would be materially negatively impacted.
 

 34 
 

 
Our
facilities, as well as those of applicable suppliers, rely on maintaining current FDA, and DEA if applicable, registration and other
license to produce and develop generic drugs and raw materials used in such operations. If we, or one of our suppliers does not successfully
renew and maintain current FDA, DEA and other required licenses, our operations and financial results would be negatively impacted. We
and our suppliers are subject to periodic inspection by the FDA, DEA and other regulatory agencies, as applicable, to assure regulatory
compliance regarding the manufacture and distribution of pharmaceutical products and raw materials. These regulatory bodies impose stringent
mandatory requirements on the manufacture and distribution of pharmaceutical products to ensure their safety and efficacy. If we or any
of our third party suppliers receive notices of manufacturing and quality-related observations and are unable to satisfactorily resolve
the issues and observations identified in a timely fashion, there could be a material adverse effect on our business, financial condition,
results of operations, cash flow and stock price.
 
Agreements
between branded pharmaceutical companies and generic pharmaceutical companies are facing increased government scrutiny in the United
States and Internationally.
 
There
are numerous and continuing litigation in which generic companies challenge the validity or enforceability of an innovator products patents
and/or the applicability of such patents to a generic applicant’s products. Settlement of such litigation is a common outcome,
with review of such agreements by the U.S. Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department
of Justice (the “DOJ”) being required by law. The FTC has stated publicly its view that some of these settlement agreements
violate antitrust laws and has commenced actions against the branded and generic companies that are parties to these agreements. Accordingly,
in the event of the Company being party to a settlement agreement, either as the branded, innovator product owner, or as the generic
applicant, we may receive formal or informal requests from the FTC for information about a settlement agreement and there is a risk of
the FTC or DOJ alleging a violation of antitrust laws and commencing an action against us.
 
Any
such action could have an adverse effect on the Company’s business, operations and financial condition.
 
Our
reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex
and may involve subjective decisions. Any determination that we have failed to comply with those obligations could subject us to penalties
and sanctions which could have a material adverse effect on our business.
 
The
regulations applicable to us regarding reporting and payment obligations with respect to Medicaid reimbursement and rebates and other
governmental programs are complex. Our calculations and methodologies are subject to review and challenge by the applicable governmental
agencies, and it is possible that such reviews could adversely affect us and our business. In addition, because our processes for these
calculations and the judgments involved in making these calculations involve, and will continue to involve, subjective decisions and
complex methodologies, these calculations are subject to the risk of error and misjudgment. Any governmental agencies that have commenced
(or that may commence) an investigation of us could impose, based on a claim of violation of anti-fraud and false claims laws
or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs (including
Medicaid and Medicare). Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore,
should there be ambiguity with respect to how to properly calculate and report payments, and even in the absence of any such ambiguity,
a governmental authority may take a position contrary to a position that we have taken and may impose civil and/or criminal sanctions
on us. Any such penalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on our business,
financial position, results of operation, ability to operate and stock price.
 
Investigations
and litigation concerning the calculation of average wholesale prices may adversely affect our business
 
Many
government and third-party payers, including Medicare, Medicaid, HMOs and others, reimburse doctors and others for the purchase of certain
prescription drugs based on a drug’s average wholesale price (“AWP”). In the past several years, state and federal
government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, as a result
of which certain agencies have suggested that reporting of inflated AWPs by manufacturers has led to excessive payments for prescription
drugs. Numerous pharmaceutical companies have been named as defendants in actions brought by various State Attorneys General and have
faced state law qui tam actions brought on behalf of various states, alleging generally that the defendants defrauded state Medicaid
systems by purportedly reporting or causing the reporting of AWP and/or “Wholesale Acquisition Costs” that exceeded the actual
selling price of the defendants’ prescription drugs. These cases generally seek some combination of actual damages, and/or double
damages, treble damages, compensatory damages, statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements,
counsel fees and costs, litigation expenses, investigative costs, injunctive relief, punitive damages, imposition of a constructive trust,
accounting of profits or gains derived through the alleged conduct, expert fees, interest and other relief that the court may have deemed
proper.
 
We
can give no assurance that we will be able to settle current or future actions on terms that we deem reasonable, or that such settlements
or adverse judgments, if entered, will not exceed the amount of any liability we have recorded. Accordingly, such actions could adversely
affect us and may have a material adverse effect on our business, results of operations, financial condition, cash flows ability to operate
and stock price.
 

 35 
 

 
Litigation
and Liability Related Risks
 
We
may not be able to obtain or maintain adequate insurance coverages.
 
The
cost of insurance, including directors and officer insurance, workers compensation, product liability for products containing opioids
and products not containing opioids, truck and general liability insurance have increase significantly in recent years and may continue
to increase in the future. We have increased deductibles and/or decreased coverages to mitigate some of these costs. These insurance
premium increases, as well as our increased risk due to reduced coverage and increased deductibles could have an adverse material effect
on our business, financial condition, results of operations, cash flows and stock price.
 
We
may not have and may be unable to obtain or maintain in the future insurance, on acceptable terms, that provide adequate coverage against
potential liabilities or other losses, such as the cost of a recall or defense against claims, if any claim is brought against us, for
any reason, regardless of the merits, success or failure of such claim. In past years, as a result of product liability and securities
litigation in the general marketplace, and a threatened claim of action against us in relation to the shareholder vote conducted in December
2019, our insurance premiums have increased significantly, while also providing no greater, and in most cases, lower levels of coverage.
 
The
amount of our insurance coverage is accordingly limited by our financial resources and greatly impacted by the significant premium increases
of the past year and reasonably expected further increases in the near to mid-term due to the global pandemic. Furthermore, even where
claims are submitted to insurance carriers for defenses and indemnity that are within coverage limits, there can be no assurance that
such claims will be fully covered by insurance or that the indemnitors or insurers will remain financially viable to provide reimbursement
consistent with coverage maintained.
 
Any
failure by us, to obtain sufficient insurance coverage, with reimbursement of claims being provided and generate sufficient cash flow,
if needed, above insurance coverage, to pay amounts due in relation to potential claims, will have a material adverse effect on our business,
financial condition, results of operations, cash flow and ability to operate as a going concern.
 
Litigation,
product liability claims, product recalls, government investigations and other significant legal proceedings are common in the pharmaceutical
industry.
 
Litigation,
product liability claims, other significant legal proceedings, government investigations and product recalls are common in the pharmaceutical
industry and can be protracted and expensive and could delay and/or prevent entry of our products into the market, which, in turn, could
have a material adverse effect on our business.
 
As
a business that operates in the pharmaceutical industry, we are inherently exposed to significant potential risks from lawsuits, product
liability claims, patent and proprietary rights claims, other significant proceedings, government investigations or product recalls,
including, without limitation, such matters associated with the testing, manufacturing, marketing and sale of our products. While no
such judgements have been made against us to date, some plaintiffs have received substantial damage awards or settlements against other
healthcare companies based upon various legal theories, including, without limitation, claims for injuries allegedly caused by use of
their products. Our business continues to be inherently exposed to the risk of being subject to product liability cases, as well as other
significant legal proceedings and government investigations.
 
For
example, we have been a manufacturer of prescription opioid medications in the past, and while we have not been subject to lawsuits,
other manufacturers of such products, as well as distributors and other sellers of such medications, have been subjects of subject of
lawsuits and have received subpoenas and other requests for information from various federal, state and local government agencies regarding
the sale, marketing and/or distribution of prescription opioid medications. Numerous claims against opioid manufacturers, have been and
may continue to be filed by or on behalf of states, counties, cities, Native American tribes, other government-related persons or entities,
hospitals, health systems, unions, health and welfare funds, other third-party payers and/or individuals. In these cases, plaintiffs
seek various remedies, including without limitation declaratory and/or injunctive relief; compensatory, punitive and/or treble damages;
restitution, disgorgement, civil penalties, abatement, attorneys’ fees, costs and/or other relief. Settlement demands may seek
significant monetary and other remedies, or otherwise be on terms that would result in material adverse effects on our business and ability
to operate as a going concern. The precedent of awards against and settlements by our competitors could also incentivize parties to bring
additional claims against us. In addition to the risks of direct expenditures for defense costs, settlements and/or judgments in connection
with these claims, proceedings and investigations, there is a possibility of loss of revenues, injunctions and disruption of business.
Furthermore, we and other manufacturers of prescription opioid medications have been, and will likely continue to be, subject to negative
publicity and press, which could harm our brand and the demand for our products. In addition, current or future regulatory and legislative
proposals could impact us and other manufacturers of prescription opioid medications. See the risk factor “Our business and financial
condition may be adversely affected by legislation” for more information.
 

 36 
 

 
In
addition, our current and former products may cause or appear to cause serious adverse side effects or potentially dangerous drug interactions
if misused or improperly prescribed or as a result of faulty surgical technique. Any failure to effectively identify, analyze, report
and protect adverse event data and/or to fully comply with relevant laws, rules and regulations around adverse event reporting could
expose the Company to legal proceedings, penalties, fines and/or reputational damage.
 
Also,
through the use of social media, plaintiff’s attorneys have a wide variety of tools to advertise their services and solicit new
clients for litigation, including using judgments and settlements obtained in litigation against us or other pharmaceutical companies
as an advertising tool. For these or other reasons, any significant product liability or mass tort litigation in which we are a defendant
could have a larger number of plaintiffs than such actions have seen historically and we could also see an increase in the number of
cases filed against us because of the increasing use of widespread and media-varied advertising. Furthermore, a ruling against other
pharmaceutical companies in product liability or mass tort litigation in which we are not a defendant could have a negative impact on
pending litigation where we are a defendant.
 
In
addition, in certain circumstances, such as in the case of products that do not meet approved specifications or for which subsequent
data demonstrate such products may be unsafe, ineffective or misused, it may be necessary for us to initiate voluntary or mandatory recalls
or withdraw such products from the market. Any such recall or withdrawal could result in adverse publicity, costs connected to the recall
and loss of revenue. Adverse publicity could also result in an increased number of additional product liability claims, whether or not
these claims have a basis in scientific fact. See the risk factor “Our business is dependent on market perceptions, social and
political pressures, including public concern over the abuse of opioids” for more information.
 
We
are also inherently exposed to litigation concerning patents and proprietary rights which can be protracted and expensive. Companies
routinely bring litigation against applicants and allege patent infringement or other violations of intellectual property rights as the
basis for filing suit against an applicant. Elite develops, owns, and/or manufactures generic and branded pharmaceutical products and
such drug products may be subject to such litigation. Litigation often involves significant expense and can delay or prevent introduction
or sale of our products.
 
There
may also be situations where we use our business judgment and decide to market and sell products, notwithstanding the fact that allegations
of patent infringement(s) have not been finally resolved by the courts. The risk involved in doing so can be substantial because the
remedies available to the owner of a patent for infringement include, among other things, damages measured by the profits lost by the
patent owner and not by the profits earned by the infringer. In the case of a willful infringement, the definition of which is subjective,
such damages may be trebled. Moreover, because of the discount pricing typically involved with bioequivalent products, patented brand
products generally realize a substantially higher profit margin than bioequivalent products. An adverse decision in a case such as this
or in other similar litigation could have a material adverse effect on our business, financial position and results of operations and
could cause the market value of our Common Stock to decline.
 
If
we are found liable in any lawsuits, including patent infringement, violation of proprietary rights, product liability claims or actions
related to our manufacture, sales, marketing or pricing practices or the sale, marketing and/or distribution of prescription opioid medications,
or if we are subject to government investigations or product recalls, it could result in the imposition of damages, including punitive
damages, fines, reputational harm, civil lawsuits, criminal penalties, interruptions of business, modification of business practices,
equitable remedies and other sanctions against us or our personnel as well as significant legal and other costs. We may also voluntarily
settle cases even if we believe that we have meritorious defenses because of the significant legal and other costs that may be required
to defend such actions. Any judgments, claims, settlements and related costs could be well in excess of any applicable insurance. As
a result, we may experience significant negative impacts on our operations. To satisfy judgments or settlements, we also may need to
seek financing, which may not be available on terms acceptable to us, or at all, when required. Judgments also could cause defaults under
our debt agreements and/or restrictions on our product use and we could incur losses as a result. Any of the risks above could have a
material adverse effect on our business, financial condition, results of operations and cash flows and ability to operate as a going
concern.
 
The
occurrence or possibility of any such result may cause us to pursue one or more significant corporate transactions as well as other remedial
measures, including internal reorganizations, restructuring activities, strategic corporate alignments, cost saving initiatives or asset
sales. See the risk factor “Our ability to fund our operations, maintain liquidity and meet our financing obligations is reliant
on our operations, which are subject to significant risks and uncertainties” for more information. Likewise, any internal reorganizations,
restructuring activities, strategic corporate alignments, cost-saving initiatives or asset sales may be complex, could entail significant
costs and charges or could otherwise negatively impact shareholder value and there can be no assurance that we will be able to accomplish
any of these alternatives on terms acceptable to us, or at all, or that they will result in their intended benefits.
 

 37 
 

 
We
also may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label”
use of drugs. In jurisdictions including, without limitation, the United States, a company is not permitted to promote drugs for uses
that are not described in the product’s labelling and that differ from those that were approved or cleared by the FDA. Such users
are commonly referred to as “off-label uses”. Under what is known as the “practice of medicine”, physicians and
other healthcare practitioners may prescribe drug products for off-label or unapproved uses. While the FDA does not regulate a physician’s
choice of medications, treatments, or product uses, the FFDCA and FDA regulations significantly restrict permissible communications on
the subject of off-label uses of drug products by pharmaceutical companies. The FDA, FTC, the Office of the Inspector General of the
Department of Health and Human Services (“HHS”), the DOJ and various state Attorneys General actively enforce laws and regulations
that prohibit the promotion of off-label uses. A company that is found to have improperly promoted off-label uses may be subject to significant
liability, including civil fines, criminal fines and penalties, civil damages, exclusion from federal funded healthcare programs and
potential liability under the federal False Claims Act and any applicable state false claims act. Conduct giving rise to such liability
could also form the basis for private civil litigation by third-party payers or other persons claiming to be harmed by such conduct.
 
Notwithstanding
the regulatory restrictions on off-label promotion, the FDA’s regulations and judicial case law allows companies to engage in some
forms of truthful, non-misleading and non-promotional speech concerning the off-label use of products. Elite believes it and its marketing
partners comply with these restrictions.
 
Nonetheless,
the FDA, HHS, DOJ, and/or state Attorneys General, and qui tam relators may take the position that the Company is not in compliance with
such requirements, and if such non-compliance is proven, the consequences of such may have an adverse material effect on our business,
financial condition, results of operations, cash flows and stock price.
 
We
are subject to various fraud and abuse laws which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
harm and diminished profits and future earnings.
 
Our
activities are subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute,
the federal civil False Claims Act, and laws and regulations pertaining to limitations on and reporting of healthcare provider payments
(physician sunshine laws). These laws and regulations are interpreted and enforced by various federal, state and local authorities including
CMS, the Office of Inspector General for the U.S. Department of Health and Human Services, the U.S. Department of Justice, individual
U.S. Attorney offices within the Department of Justice, and state and local governments. These laws include:
 


 
●
    
the
    U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting,
    offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward
    either the referral of an individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or
    order of, any good or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare
    and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order
    to have committed a violation

 
 
 

 
●
    
the
    U.S. civil False Claims Act (which can be enforced through “qui tam,” or whistleblower actions, by private citizens on
    behalf of the federal government and impose civil and criminal penalties), prohibits any person from, among other things, knowingly
    presenting, or causing to be presented false or fraudulent claims for payment of government funds or knowingly making, using or causing
    to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly
    avoiding, decreasing or concealing an obligation to pay money to the U.S. federal government; 

 
 
 

 
●
    
U.S.
    federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal liability and amends provisions
    on the reporting, investigation, enforcement, and penalizing of civil liability for, among other things, knowingly and willfully
    executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing
    or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare
    benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs;
    similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific
    intent to violate it in order to have committed a violation; 

 
 
 

 
●
    
HIPAA,
    as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations,
    which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission
    of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as
    health plans, healthcare clearinghouses and healthcare providers as well as their business associates and their subcontractors that
    perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

 
 
 

 
●
    
state
    laws and regulations, including state anti-kickback and false claims laws, that may apply to our business practices, including but
    not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed
    by any third-party payer, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical
    industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government,
    or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and
    regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking
    gifts and other remuneration and items of value provided to healthcare professionals and entities; 

 

 38 
 

 


 
●
    
the
    Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, requires certain manufacturers
    of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health
    Insurance Program to report annually to CMS information related to certain payments made in the preceding calendar year and other
    transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their
    immediate family members; beginning in 2022, applicable manufacturers are required to report such information regarding payments
    and transfers of value provided, as well as ownership and investment interests held, during the previous year to physician assistants,
    nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; and 

 
 
 

 
●
    
the
    Foreign Corrupt Practices Act, or the FCPA, which generally prohibits offering, promising, giving, or authorizing others to give
    anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise
    obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly
    reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our industry
    is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments.
    Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed by their government,
    and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are
    subject to regulation under the FCPA. Recently, the SEC and Department of Justice have increased their FCPA enforcement activities
    with respect to pharmaceutical companies. 

 
Violations
of any of these laws or any other governmental regulations that may apply to us, may subject us to significant civil, criminal and administrative
sanctions including penalties, damages, fines, imprisonment, and exclusion from government funded healthcare programs, such as Medicare
and Medicaid, and/or adverse publicity. Moreover, government entities and private litigants have asserted claims under state consumer
protection statutes against pharmaceutical companies for alleged false or misleading statements in connection with the marketing, promotion
and/or sale of pharmaceutical products, including state investigations and litigation by certain government entities regarding the marketing
of opioid products.
 
Our
products contain controlled substances which may subject us to increased litigation risk and regulation.
 
Some
of our current products and products under development contain controlled substances. Misuse or abuse of such drugs can lead to physical
or other hard. The FDA and/or the DEA may impose new regulations concerning the manufacture, storage, transportation, distribution, and
sale of prescription narcotics. Such regulations may include new labelling requirements, the development and implementation of a formal
REMS, restrictions on prescription and sale of such products and mandatory reformulation in order to make abuse of such products more
difficult. In 2007, Congress passed legislation authorizing the FDA to require companies to undertake post-approval studies in order
to assess known or signaled potential serious safety risks and to make any labelling changes necessary to address safety risks. Congress
also empowered the FDA to require companies to formulate REMS to confirm a drug’s benefits exceed its risks. In 2011, the FDA issued
letters to manufacturers of long-acting and extended-release opioids requiring them to develop and submit to the FDA a post-market REMS
plan to require that training be provided to prescribers of these products and that information is provided to prescribers that they
can use in counselling patients on the risks and benefits of opioid drug use. Elite does not currently own a product that requires a
REMS plan, but some of the products in our pipeline may require a REMS plan. The federal government has also released a comprehensive
action plan to reduce prescription drug abuse, which may include proposed legislation to amended existing controlled substances laws
to require healthcare practitioners who request DEA registration to prescribe controlled substances to receive training on opioid prescribing
practices as a condition of registration. In addition, state health departments and boards of pharmacy have authority to regulate distribution
and may modify their regulations with respect to prescription narcotics in an attempt to curb abuse.
 
Mandatory
REMS programs could increase the cost, burden and liability associated with the commercialization of certain products.
 
The
FDA has imposed a class-wide REMS on all IR, ER and long acting opioid drug products (known as the Opioid Analgesic REMS). The FDA continually
evaluates whether the REMS program is meeting its goal of ensuring that the benefit of these drugs continue to outweigh their risks,
and whether the goals or elements of the program should be modified. If the FDA determines that additional measures are necessary, the
modification of the Opioid Analgesic REMS to impose additional or more burdensome requirements could increase the costs associated with
marketing opioid products and/or reduce the willingness of healthcare providers to prescribe those products, both which would have a
material adverse effect on the ability to successfully commercializing, or to generate sufficient revenue from, such products.
 

 39 
 

 
Illegal
distribution and third party sale of counterfeit versions of our products could have a detrimental effect on our reputation and business.
 
Third
parties could illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous manufacturing and testing
standards that our products undergo. Counterfeit products are frequently unsafe or ineffective and can be life-threatening. Counterfeit
medicines may contain harmful substances, the wrong dose of the active pharmaceutical ingredient or no active pharmaceutical ingredients
at all. However, to distributors and users, counterfeit products may be visually indistinguishable from the authentic version.
 
Reports
of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic
product. It is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product.
In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored, and which are sold through
unauthorized channels could adversely impact patient safety, our reputation, and our business.
 
Public
loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting or theft could have a material adverse effect
on our business, results of operations and financial condition.
 
Our
competitors or other third parties may allege that we are infringing upon their intellectual property (“IP”), forcing us
to expend substantial resources in litigation, the outcome of which is uncertain. Any unfavorable outcome of such litigation, including,
without limitation, losses related to “at-risk” product launches, could have a material effect our business, financial position
and results of operations.
 
Companies
that produce branded pharmaceutical products routinely bring litigation against ANDA filers or similar applicants that seek regulatory
approval to manufacture and market generic forms of their branded products alleging patent infringement or other violations of IP rights.
Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved generic products.
Litigation often involves significant expense and can delay or prevent introduction or sale of our generic and/or biosimilar products.
If valid and enforceable patents are infringed by our products, we would need to delay selling the infringing generic product unless
we could obtain a license from the patent holder, and, if we were already selling the infringing product, cease selling and potentially
destroy existing product stock.
 
There
may be situations in which we may make business and legal judgments to market and sell products that are subject to claims of alleged
patent infringement prior to final resolution of those claims by the courts, based upon our belief that such patents are invalid, unenforceable,
or are not infringed by our marketing and sale of such products. This is referred to in the pharmaceutical industry as an “at-risk”
launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies
available to such holder may include, among other things, damages measured by the profits lost by the patent holder or treble damages,
which can be significantly higher than the profits we make from selling the generic version of the product. We may also be harmed by
the loss of any value of such inventory that we are unable to market or sell. Any or all of the above could have a material adverse effect
on our business, financial condition, results of operations, cash flow, ability to operate as a going concern and stock price.
 
Intellectual
Property Related Risks
 
Our
ability to protect intellectual property rights and successfully defend third party allegations of intellectual property infringement
is vital to our business and uncertain.
 
Our
success depends on our ability to protect our current and future products and to defend our intellectual property rights. If we fail
to protect our intellectual property adequately, competitors may manufacture and market products similar to ours.
 
We
currently hold three patents and we may intend to file further patent applications in the future. We cannot be certain that any further
patent applications will result in the issuance of patents. If patents are issued, third parties may sue us to challenge our patent protection,
and although we know of no reason why they should prevail, it is possible that they could. In addition to modification or revocation
of patents in legal proceedings, issued patents may later be modified or revoked by the U.S. Patent and Trademark Office or by analogous
foreign offices. It is likewise possible that our patent rights may not prevent or limit our present and future competitors from developing,
using or commercializing products that are similar or functionally equivalent to our products.
 
In
addition, we may be required to obtain licenses to patents, or other proprietary rights of third parties, in connection with the development
and use of our products and technologies as they relate to other persons’ technologies. At such time as we discover a need to obtain
any such license, we will need to establish whether we will be able to obtain such a license on favorable terms, if at all. The failure
to obtain the necessary licenses or other rights could preclude the sale, manufacture or distribution of our products.
 

 40 
 

 
We
rely particularly on trade secrets, unpatented proprietary expertise and continuing innovation that we seek to protect, in part, by entering
into confidentiality agreements with licensees, suppliers, employees, and consultants. We cannot provide assurance that these agreements
will not be breached or circumvented. We also cannot be certain that there will be adequate remedies in the event of a breach. Disputes
may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. We cannot be sure that
our trade secrets and proprietary technology will not otherwise be obtained by other entities, such as government or regulatory authorities,
or become known, obtained, or independently developed by our competitors or by other entities through means beyond our control. We also
cannot be sure that, if patents are not issued with respect to products arising from research, we will be able to maintain the confidentiality
of information relating to these products. In addition, efforts to ensure our intellectual property rights can be costly, time-consuming,
and/or ultimately unsuccessful.
 
Furthermore,
companies that produce branded pharmaceutical products routinely bring litigation against ANDA or similar applicants that seek regulatory
approval to manufacture and market generic forms of branded products, alleging patent infringement or other violations of intellectual
property rights. Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved
generic products. Litigation often involves significant expense. Additionally, if the patents of others are held valid, enforceable and
infringed by our current products or future product candidates, we would, unless we could obtain a license from the patent holder, need
to delay selling our corresponding generic product and, if we are already selling our product, cease selling and potentially destroy
existing product stock. Additionally, we could be required to pay monetary damages or royalties to license proprietary rights from third
parties and we may not be able to obtain such licenses on commercially reasonable terms or at all.
 
There
may be situations in which we may make business and legal judgments to market and sell products that are subject to claims of alleged
patent infringement prior to final resolution of those claims by the courts based upon our belief that such patents are invalid, unenforceable
or are not infringed by our marketing and sale of such products. This is commonly referred to in the pharmaceutical industry as an “at-risk”
launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies
available to such holder may include, among other things, damages calculated based on the profits lost by the patent holder, which can
be significantly higher than the profits we make from selling the generic version of the product. Moreover, if a court determines that
such infringement is willful, the damages could be subject to trebling. We could face substantial damages from adverse court decisions
in such matters. We could also be at risk for the value of such inventory that we are unable to market or sell.
 
The
occurrence of any of the above could have a material adverse effect on our business, financial condition, results of operations, cash
flow and stock price.
 
Risks
Related to our Common Shares
 
Dilution
from issuance of shares to Directors, Employees, Consultants or upon exercise of warrants and options or the perception that dilution
may occur could cause the price per share of common stock to fall.
 
As
of March 31, 2024, there were outstanding warrants to purchase an aggregate of approximately 79.0 million shares of Common Stock at a
cash exercise price of $0.1521 per share, vested options to purchase an aggregate of approximately 15.7 million shares at a weighted
average cash exercise price of $0.05. Additional shares of Common Stock may be issuable as a result of anti-dilution provisions in the
outstanding warrants. We may also issue shares from time to time to our directors, officers, employees, and consultants.
 
As
a result of the above discussed potential issuance of securities, such issuances by us could result in substantial dilution to the interests
of other holders of our common stock, and the subsequent sale of these shares, or the perception that the sale of these shares may occur,
could cause the price of our common stock to fall. Additionally, the conversion or exercise of outstanding shares of warrants, or the
anticipation of such issuances, could make it more difficult for us to sell equity or equity-related securities in the future at a time
and at a price that we might otherwise wish to effect sales.
 
Our
common stock is a penny stock, quoted on the OTC bulletin board, with rules in place that could limit trading and liquidity of our shares,
increased transaction costs that could adversely affect our price per share.
 
Our
common stock is a “low-priced” security or “penny stock” under rules promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). In accordance with these rules, broker-dealers participating in transactions
in low-priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s
duties in selling the stock, the customer’s rights and remedies and certain market and other information. Furthermore, the broker-dealer
must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial
situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain
specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions
will likely decrease the willingness of broker-dealers to make a market in our Common Stock, will decrease liquidity of our Common Stock
and will increase transaction costs for sales and purchases of our Common Stock as compared to other securities.
 

 41 
 

 
In
addition, our Common stock is quoted on the Venture Market (the “OTCQB”) which is a regulated quotation service that displays
real-time quotes, last sale prices and volume limitations in over-the-counter securities. Because trades and quotations on the OTCQB
involve a manual process, the market information for such securities cannot be guaranteed. In addition, quote information, or even firm
quotes, may not be available. The manual execution process may delay order processing and intervening price fluctuations may result in
the failure of a limit order to execute or the execution of a market order at a significantly different price. Execution of trades, execution
reporting and the delivery of legal trade confirmations may be delayed significantly. Consequently, one may not be able to sell shares
of our Common Stock at the optimum trading prices.
 
When
fewer shares of a security are being traded on the OTCQB, volatility of prices may increase, and price movement may outpace the ability
to deliver accurate quote information. Lower trading volumes in a security may result in a lower likelihood of an individual’s
orders being executed, and current prices may differ significantly from the price one was quoted by the OTCQB at the time of the order
entry. Orders for OTCQB securities may be cancelled or edited like orders for other securities. All requests to change or cancel an order
must be submitted to, received, and processed by the OTCQB. Due to the manual order processing involved in handling OTCQB trades, order
processing and reporting may be delayed, and an individual may not be able to cancel or edit his order. Consequently, one may not be
able to sell shares of Common Stock at the optimum trading prices.
 
The
dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller
of securities on the OTCQB if the Common Stock or other security must be sold immediately. Further, purchasers of securities may incur
an immediate “paper” loss due to the price spread. Moreover, dealers trading on the OTCQB may not have a bid price for securities
bought and sold through the OTCQB. Due to the foregoing, demand for securities that are traded through the OTCQB may be decreased or
eliminated.
 
Shareholder
activism could negatively affect us.
 
In
recent years, shareholder activism involving corporate governance, fiduciary duties of Directors and Officers, strategic direction and
operations has become increasingly prevalent. If we become the subject of such shareholder activism, their demands may disrupt our business
and divert the attention of our management, Board and employees. Also, we may incur substantial costs, including legal fees and other
expenses, related to such activist shareholder matters. Perceived uncertainties resulting from such activist shareholder matters may
result in loss of potential business opportunities with our current and potential customers and business partners, be exploited by our
competitors and make attracting and retaining qualified personnel more difficult. In addition, such shareholder activism may cause significant
fluctuations in our share price based on temporary or speculative market perceptions, uncertainties or other factors that do not necessarily
reflect the underlying fundamentals and prospects of our business.
 
The
effects of shareholder activism pursued against the Company could have an adverse material effect on our business, financial condition,
results of operations, cash flows and stock price.
 
Our
stock price has been volatile.
 
The
market price for the publicly traded stock of pharmaceutical companies is generally characterized by high volatility. There has been
significant volatility in the market prices for our Common Stock. For the twelve months ended March 31, 2024, the closing sale price
on the Venture Market (“OTCQB”) of our Common Stock fluctuated from a high of $0.21 per share to a low of $0.03 per share.
The price per share of our Common Stock may not exceed or even remain at current levels in the future. The market price of our Common
Stock may be affected by a number of factors, including, without limitation:
 


 
●
    
Results
    of our clinical trials;

 
 
 

 
●
    
Approval
    or disapproval of our ANDAs or NDAs;

 
 
 

 
●
    
Announcements
    of innovations, new products, or new patents by us or by our competitors;

 
 
 

 
●
    
Announcements
    of other material events;

 
 
 

 
●
    
Governmental
    regulation;

 
 
 

 
●
    
Patent
    or proprietary rights developments;

 
 
 

 
●
    
Proxy
    contests or litigation;

 
 
 

 
●
    
News
    regarding the efficacy of, safety of or demand for drugs or drug technologies;

 

 42 
 

 


 
●
    
Economic
    and market conditions, generally and related to the pharmaceutical industry;

 
 
 

 
●
    
Healthcare
    legislation;

 
 
 

 
●
    
Changes
    in third-party reimbursement policies for drugs; and

 
 
 

 
●
    
Fluctuations
    in our operating results.

 
Capital
raises through sales of securities may cause substantial dilution to existing shareholders.
 
Any
additional financing that involves the further sale of our securities could cause existing holders of our Common Stock to experience
substantial dilution. On the other hand, if we incurred debt, we would be subject to risks associated with indebtedness, including the
risk that interest rates might fluctuate, and cash flow would be insufficient to pay principal and interest on such indebtedness.
 
Issuance
of shares of common or preferred stock could make achieving a change of control more difficult.
 
The
issuance of additional shares of our Common Stock, including those shares issued pursuant to conversion of convertible preferred shares,
or the issuance of shares of an additional series of preferred stock could be used to make a change of control of us more difficult and
expensive. Under certain circumstances, such shares could be used to create impediments to, or frustrate persons seeking to cause, a
takeover or to gain control of us. Such shares could be sold to purchasers who might side with our Board of Directors in opposing a takeover
bid that the Board of Directors determines not to be in the best interests of our shareholders. It might also have the effect of discouraging
an attempt by another person or entity through the acquisition of a substantial number of shares of our Common Stock to acquire control
of us with a view to consummating a merger, sale of all or part of our assets, or a similar transaction, since the issuance of new shares
could be used to dilute the stock ownership of such person or entity.
 
We
have no plans to pay regular dividends or conduct share purchases.
 
We
do not intend to pay any cash dividends either currently or in the foreseeable future on our common shares. Additionally, we do not intend
to conduct share repurchases either currently or in the foreseeable future.
 
ITEM
1B. UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM
1C. CYBERSECURITY
 
As
part of the Company’s overall enterprise risk management processes, the Company maintains a cyber risk management program designed
to identify, assess, manage, mitigate, and respond to cybersecurity threats.
 
The
underlying processes and controls of the Company’s cyber risk management program incorporate recognized best practices and standards
for cybersecurity and information technology, including the National Institute of Standards and Technology (“NIST”) Cybersecurity
Framework (“CSF”). Elite has an annual assessment performed by a third-party specialist of the Company’s cyber risk
management program against the NIST CSF. The annual risk assessment identifies, quantifies, and categorizes material cyber risks. In
addition, the Company, in conjunction with the third-party cyber risk management specialists develop a risk mitigation plan to address
such risks, and where necessary, remediate potential vulnerabilities identified through the annual assessment process.
 
In
addition, Elite maintains processes to help govern the processes put in place by management designed to protect the Company’s IT
assets, data, and services from threats and vulnerabilities. Elite employs additional key practices within the cybersecurity risk management
program including, but not limited to maintenance of an IT assets inventory, identity access management controls including restricted
access of privileged accounts, physical security measures at Company facilities, information protection (IPS)/detection systems (IDS)
including maintenance of firewalls, network and data traffic monitoring and automated alerting, and critical data backups to reduce cybersecurity
risk.
 
Cybersecurity
partners to the Company, including, consultants, and other third-party service providers are a key part of Elite Pharmaceutical’s
cybersecurity risk management strategy and infrastructure. Elite partners with industry recognized cybersecurity providers leveraging
third-party technology and expertise and engages with these partners to monitor and maintain the performance and effectiveness of IT
assets, data, and services that are deployed in the Company’s environment. The cybersecurity partners provide services including,
but not limited to systems inventory monitoring, user management, network protection and monitoring, IPS/IDS management, remote access
monitoring and management, user activity monitoring, data backups management, cybersecurity strategy, and cyber risk advisory, including
assessment and remediation.
 
Elite’s
management team, in conjunction with cybersecurity service providers is responsible for oversight and administration of Elite’s
cyber risk management program, and for informing senior management and other relevant stakeholders regarding the prevention, detection,
mitigation, and remediation of cybersecurity incidents. The Company’s management team has prior experience selecting, deploying,
and overseeing cybersecurity technologies, initiatives, and processes directly or via selection of strategic third-party partners, and
also relies on threat intelligence as well as other information obtained from governmental, public or private sources, including external
consultants engaged by Elite for strategic cyber risk management, advisory and decision making.
 

 43 
 

 
The
Audit Committee of the Board of Directors oversees Elite’s cybersecurity risk exposures and the steps taken by management to monitor
and mitigate cybersecurity risks. The cybersecurity stakeholders, including members of management assigned with cybersecurity oversight
responsibility and/or third-party consultants providing cyber risk services brief the Audit Committee on cyber vulnerabilities identified
through the risk management process, the effectiveness of Elite’s cyber risk management program, and the emerging threat landscape
and new cyber risks on at least an annual basis. This includes updates on processes to prevent, detect, and mitigate cybersecurity incidents.
The Company also relies on threat intelligence and other information obtained from governmental, public, or private sources, including
external consultants engaged by the Company for strategic cyber risk management, advisory and decision making.
 
Elite
has implemented third-party risk management processes to manage the risks associated with reliance on vendors, critical service providers,
and other third-parties that may lead to a service disruption or an adverse cybersecurity incident. This includes service level agreement
monitoring and contract negotiations.
 
Elite
faces risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations,
cash flows or reputation. Elite acknowledges that the risk of cyber incident is prevalent in the current threat landscape and that a
future cyber incident may occur in the normal course of its business. However, as of the date of this Annual Report on Form 10-K, the
Company is not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect
Elite’s business strategy, financial condition, results of operations, or cash flows. The Company proactively seeks to detect and
investigate unauthorized attempts and attacks against Company IT assets, data, and services, and to prevent their occurrence and recurrence
where practicable through changes or updates to internal processes and tools and changes or updates to Company service delivery; however,
potential vulnerabilities to known or unknown threats will still remain. Further, there is increasing regulation regarding responses
to cybersecurity incidents, including reporting to regulators, investors, and additional stakeholders, which could subject the Company
to additional liability and reputational harm. In response to such risks, the Company has implemented initiatives such as implementation
of the cybersecurity risk assessment process and development of an incident response plan. See Item 1A. “Risk Factors” for
more information on cybersecurity risks.
 
ITEM
2. PROPERTIES
 
We
own a facility located at 165 Ludlow Avenue, Northvale, New Jersey (“165 Ludlow”) which contains approximately 15,000 square
feet of floor space. This real property and the improvements thereon are encumbered by a mortgage in favor of the New Jersey Economic
Development Authority (“NJEDA”) as security for a loan through tax-exempt bonds from the NJEDA to Elite. The mortgage contains
certain customary provisions including, without limitation, the right of NJEDA to foreclose upon a default by Elite. The NJEDA has declared
the payment of this bond to be in default (for more information on the NJEDA Bonds, see Part II, Item 7 “Management’s Discussion
and Analysis of Financial Condition and Results of Operations; Liquidity and Capital Resources; NJEDA Bonds”). We are currently
using the facility as a laboratory, manufacturing, storage, distribution, and office space.
 
We
own a facility located at 135-137 Ludlow Avenue, Northvale, New Jersey (“135 Ludlow”) which contains approximately 35,000
square feet of floor space. This real property and the improvements thereon are encumbered by a mortgage in favor of East West Bank.
 
In
October 2020, the Company entered into an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”).
The Pompano Office Lease is for approximately 1,275 square feet of office space, with Elite taking occupancy on November 1, 2020. The
Pompano Office includes a 3 month abatement from November 2020 through February 2021 and had an original term of three years, ending
on October 31, 2023. The Pompano Office Lease has been extended for one additional year to October 31, 2024.
 
The
Company has entered into a lease agreement for approximately 35,000 square feet of floor space in a building located at 144 Ludlow Avenue,
Northvale, New Jersey (the “144 Ludlow Ave. lease”). The 144 Ludlow Ave. lease began on January 22, 2024, and has a term
of five years. The 144 Ludlow Ave. lease will expire on December 31, 2028. The lease terms also include a Company option to extend the
term by two years.
 
Properties
used in our operation are considered suitable for the purposes for which they are used, at the time they are placed into service, and
are believed adequate to meet our needs for the reasonably foreseeable future.
 
ITEM
3. LEGAL PROCEEDINGS
 
On
August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA
by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November
14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue
to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on approval by the FDA and the outcome
of various litigations involving Purdue or the expiry of the patents listed on the Orange Book.
 
In
the ordinary course of business, we may be subject to litigation from time to time. There is no current, pending or, to our knowledge,
threatened litigation or administrative action to which we are a party or of which our property is the subject (including litigation
or actions involving our officers, directors, affiliates, or other key personnel, or holders of record or beneficially of more than 5%
of any class of our voting securities, or any associate of any such party) which in our opinion has, or is expected to have, a material
adverse effect upon our business, prospects financial condition or operations. A significant increase in the number of claims or an increase
in amounts owing under successful claims could materially adversely affect our business, financial condition, results of operations and
cash flows.
 
ITEM
4. MINE SAFETY DISCLOSURES
 
Not
Applicable.
 

 44 
 

 
PART
II
 
ITEM
5. MARKET FOR COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market
Information
 
Our
Common Stock is quoted on the Venture Market (“OTCQB”) under the ticker symbol “ELTP”. The following table shows,
for the periods indicated, the high and low bid prices per share of our Common Stock as by OTCQB. Over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
 


Quarter Ended 
High  
Low 

Fiscal Year Ending March 31, 2024 
    
   

March 31, 2024 
$0.21  
$0.13 

December 31, 2023 
$0.16  
$0.09 

September 30, 2023 
$0.10  
$0.04 

June 30, 2023 
$0.04  
$0.03 

  
    
   

Fiscal Year Ending March 31, 2023 
    
   

March 31, 2023 
$0.04  
$0.03 

December 31, 2022 
$0.04  
$0.03 

September 30, 2022 
$0.05  
$0.03 

June 30, 2022 
$0.05  
$0.03 

 
As
of June 26, 2024, the last reported sale price of our Common Stock, as reported by the OTCQB, was $0.18.
 
Holders
 
As
of June 26, 2024, there were approximately 105 holders of record of our Common Stock.
 
Dividends
 
We
have never paid cash dividends on our Common Stock. We currently anticipate that we will retain all available funds for use in the operation
and expansion of our business.
 
Recent
Sales of Unregistered Securities
 
None.
 
Securities
Authorized for Issuance under Equity Compensation Plans
 
The
following table sets forth certain information regarding Elite’s equity compensation plans as of March 31, 2024:
 


Plan Category 
Number of securities to be
 issued upon exercise of outstanding options, warrants, and rights (a)  
Weighted-average exercise price per share of outstanding options, warrants, and rights (b)  
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 
(a)) 

Equity compensation plans approved by security holders (1) 
 15,730,000  
$0.05  
 — 

Equity compensation plans not approved by security holders (2) 
 —  
 —  
 80,000,000 

Total 
 15,730,000  
 —  
 80,000,000 

 


(1)
    
Represents
    securities reserved and available for grant under the 2014 Equity Incentive Plan

 
 

(2)
    
Represents
    securities reserved and available for grant under the 2024 Equity Incentive Plan

 

 45 
 

 
2014
Equity Incentive Plan
 
Our
2014 Equity Incentive Plan (the “2014 Plan”) was adopted by the Board on March 17, 2014, to attract, motivate and retain
officers, employees, consultants, and directors by issuing common stock-based incentives to directors, officers, employees, and consultants
who are selected for participation. By relating incentive compensation to increases in shareholder value, it is hoped that these individuals
will both continue in the long-term service of the Company and be motivated to experience a heightened interest and participate in the
future success of Company operations. An aggregate of 3,000,000 shares of Common Stock were initially reserved for grant and issuance
pursuant to the 2014 Plan. The 2014 Plan is administered and interpreted by our Compensation Committee (the “Administrator”).
Awards under the 2014 Plan may be granted in any one or all of the following forms: (i) incentive stock options (“ISOs”)
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”); (ii) non-qualified stock
options (“NSOs”); (iii) stock appreciation rights, which may be granted in tandem with options or on a stand-alone basis;
(iv) shares of restricted stock; (v) shares of unrestricted stock; (vi) performance shares, and (vii) performance units.
 
Options
may not be granted under the 2014 Plan at an exercise price of less than the fair market value of the common stock on the date of grant
and the term of options cannot exceed ten years. ISOs may only be granted to persons who are employees of the Company. The exercise price
of an ISO granted to a holder of more than 10% of the common stock must be at least 110% of the fair market value of the common stock
on the date of grant, and the term of these options cannot exceed five years.
 
The
Administrator also may grant stock appreciation rights. Stock appreciation rights represent the right to receive upon exercise an amount
payable in cash or common stock equal to (A) the number of shares with respect to which the stock appreciation right is being exercised
multiplied by (B) the excess of (i) the fair market value of a share of common stock on the date the award is exercised over (ii) the
exercise price specified in the award agreement.
 
Under
the performance award component of the 2014 Plan, participants may be granted an award denominated in shares of common stock or in dollars.
Achievement of the performance targets, or multiple performance targets established by the Administrator relating to corporate, group,
unit or individual performance based upon standards set by the Administrator shall entitle the participant to payment at the full amount
or a portion of the amount specified with respect to the award, at the discretion of the Administrator based on its evaluation of the
performance of the target goals applicable to such award. Payment may be made in cash, common stock or any combination thereof, as determined
by the Administrator, and shall be adjusted in the event the participant ceases to be an employee of the Company before the end of a
performance cycle by reason of death, disability, or retirement.
 
Under
the stock component of the 2014 Plan, the Administrator may, in selected cases, grant to a plan participant a given number of shares
of restricted stock or unrestricted stock. Restricted stock under the 2014 Plan is common stock restricted as to sale pending fulfillment
of such vesting schedule and employment requirements as the Administrator shall determine. Prior to the lifting of the restrictions,
the participant will nevertheless be entitled to receive distributions in liquidation and dividends on, and to vote the shares of, the
restricted stock. The 2014 Plan provides for forfeiture of restricted stock for breach of conditions of grant.
 
The
2014 Plan also permits the board of directors (and not the Compensation Committee) to grant awards of NSOs, restricted stock or unrestricted
stock to non-employee directors. The board may authorize individual grants or adopt one or more formulas for grants of awards to the
non-employee directors. All options granted to non-employee directors must have an exercise price equal to the fair market value at the
date of grant.
 
The
exercise price of awards may be paid in cash, in shares of common stock (valued at fair market value at the date of exercise), by delivery
of a notice of exercise together with irrevocable instructions to a broker to deliver to the Company the proceeds of the sale of common
stock or of a loan from the broker sufficient to pay the exercise price, by having the Company withhold from shares being exercised the
number of shares having a fair market value equal to the exercise price for all shares being exercised, or by a combination of the foregoing
means of payment, as may be determined by the Administrator.
 
The
2014 Plan expired on March 17, 2024.
 
2024
Equity Incentive Plan
 
Our
2024 Equity Incentive Plan (the “2024 Plan”) was adopted by the Board on March 27, 2024, to enhance the Company’s and
its Affiliates’ ability to attract and retain highly qualified employees, officers, Non-Employee Directors, and Consultants, and
to motivate such employees, officers, Non-Employee Directors, and Consultants to serve the Company and its Affiliates and to expend maximum
effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase
a direct proprietary interest in the operations and future success of the Company. To this end, the 2024 Plan provides for the grant
of Options, Stock Appreciation Rights (“SAR”), Restricted Stock, Restricted Stock Units, and Other Stock-based Awards. Any
of these Awards may, but need not, be made as performance incentives to reward attainment of performance goals in accordance with the
terms hereof. Options may only be granted as NSOs and will not qualify as ISOs. Upon becoming effective, the Plan replaces, and no further
awards shall be made under, the 2014 Plan.
 

 46 
 

 
Each
option granted under the 2024 Plan shall be a NSO, with such being defined as an option to purchase shares of Common Stock that does
not meet the criteria of an incentive stock option within the meaning of Section 422 of Code. The exercise price for share of Common
Stock subject to an option shall be fixed by the Board and shall be at least the fair market value of a share of Common Stock on the
grant date, provided that in no case shale the option price be less than the par value of a share of Common Stock.
 
A
SAR shall confer on the participant a right to receive, upon exercise thereof, the excess of the fair market value of one share of Common
Stock on the date of exercise over the SAR exercise price, as determined by the Board. The award agreement for a SAR shall specify the
SAR exercise price, which shall be fixed on the grant date as not less than the fair market value of a share of Common Stock on that
date, provided, however that the SAR’s grant price may not be less than the fair market value of a share of Common Stock on the
grant date of the SAR to the extent required by Section 409A of the Code.
 
Under
the restricted stock and restricted stock units component of the 2024 Plan, the Board may award grants of share of Common Stock or bookkeeping
entries representing the equivalent shares of Common Stock with restrictions determined by the Board, which include, without limitation,
a restricted period of time and the satisfaction of corporate or individual performance objectives.
 
Payment
of the option price for shares purchased pursuant to the exercise of an option, or the purchase price for restricted stock shall be made
in cash or in cash equivalents acceptable to the Company, except that with respect to an option only, to the extent permitted by law
and to the extent the option award agreement so provides, payment of the option price may be made all or in part by delivery (on a form
acceptable to the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Common
Stock and to deliver all or part of the sales proceeds to the Company in payment of the option price and any withholding taxes required
under applicable laws.
 
The
2024 Plan provides for the Board’s granting of other stock based awards in addition to or in conjunction with other awards under
the 2024 Plan. Such other stock based awards may be used in the settlement of amounts payable in shares of Common Stock under any other
compensation plan or arrangement of the Company.
 
Issuer
Purchases of Equity Securities
 
None.
 
ITEM
6. [RESERVED]
 

 47 
 

 
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Management’s
Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to provide a reader of our consolidated
financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity
and certain other factors that may affect our future results. You should read the following discussion and analysis of our financial
condition and results of operations together with our financial statements and the related notes and other financial data included elsewhere
in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report,
including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks
and uncertainties. You should review Item 1A of this Annual Report for a discussion of important factors that could cause actual results
to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion
and analysis.
 
Results
of Operations:
 
For
the Years Ended March 31, 2024 and 2023
 
Revenue,
Cost of revenue and Gross profit:
 


  
For the Years Ended March 31,  
Change 

  
2024  
2023  
Dollars  
Percentage 

Manufacturing fees 
$54,120,731  
$29,187,573  
$24,933,158  
 85%

Licensing fees 
 2,504,397  
 4,967,541  
 (2,463,144) 
 (50)%

Total revenue 
 56,625,128  
 34,155,114  
 22,470,014  
 66%

Cost of manufacturing 
 30,268,025  
 17,561,093  
 12,706,932  
 72%

Gross profit 
$26,357,103  
$16,594,021  
$9,763,082  
 59%

  
    
    
    
   

Gross profit - percentage 
 47% 
 49% 
    
   

 
Total
revenues for the year ended March 31, 2024 increased by $22.5 million or 66%, to $56.6 million, as compared to $34.2 million, for the
of the prior fiscal year, primarily due to the launch of the Elite label during the current fiscal year which achieved increased sales
for the year ended March 31, 2024, as compared to the prior year, which did not include any sales of Elite label products.
 
Manufacturing
fees revenue increased by $24.9 million, or 85%, primarily due to the launch of the Elite label during the current fiscal year which
achieved increased sales for the year ended March 31, 2024, as compared to the prior year, which did not include any sales of Elite label
products.
 
Licensing
fees revenue decreased by $2.5 million, or 50%. This decrease is primarily due to the expiration of the marketing alliance agreements
between the Company and Lannett Company, Inc. (the “Lannett Agreements”) on March 31, 2023. The revenue streams that were
generated during periods ending on or prior to March 31, 2023 and attributed to the Lannett Agreements, included profit splits on the
sale by Lannett of Amphetamine IR and Amphetamine ER. Since April 1, 2023, these products are now sold by the Company under its own label,
with revenues being recorded as manufacturing revenues instead of licensing fees going forward.
 
Cost
of revenue consists of manufacturing and assembly costs. Our cost of revenue increased by $12.7 million or 72%, to $30.3 million as compared
to $17.6 million for the prior fiscal year. This increase was due to an increased volume of products sold during the year ended March
31, 2024, as compared to the prior fiscal year, as noted above.
 
Our
gross profit margin was 47% during the year ended March 31, 2024 as compared to 49% during the prior fiscal year. The decrease is due
to increased manufacturing volumes resulting in decreased unit costs due to efficiencies of scale being achieved on the increased manufacturing
volume. In addition, the commercial launch of the Elite label and expiration of the Lannett Agreements resulted in higher net revenues
per unit being achieved. Both of these factors had the effect of increased gross profit margin.
 

 48 
 

 
Operating
expenses:
 


  
For the Years Ended March 31,  
Change 

  
2024  
2023  
Dollars  
Percentage 

Operating expenses: 
    
    
    
   

Research and development 
$6,883,351  
$6,200,163  
$683,188  
 11%

General and administrative 
 7,145,114  
 5,122,272  
 2,022,842  
 39%

Non-cash compensation 
 159,921  
 39,325  
 120,596  
 307%

Impairment of intangible assets 
 —  
 292,807  
 (292,807) 
 (100)%

Depreciation and amortization 
 1,379,948  
 1,263,452  
 116,496  
 9%

Total operating expenses 
$15,568,334  
$12,918,019  
$2,650,315  
 21%

 
Operating
expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization
expenses. Operating expenses for the year ended March 31, 2024 increased by $2.7 million, or 21%, to $15.6 million as compared to $12.9
million for the prior fiscal year, largely due to an increase in research and development of $0.7 million and general and administrative
expenses of $2.0 million.
 
Research
and development costs during the year ended March 31, 2024 were $6.9 million, an increase of $0.7 million, or 11%, from approximately
$6.2 million of such costs for the prior year. The increase was a result of the timing and nature of product development activities during
the year ended March 31, 2024 as compared to the prior fiscal year.
 
General
and administrative expenses for the year ended March 31, 2024 were $7.1 million as compared to $5.1 million for the prior fiscal year,
an increase of $2.0 million or approximately 39%, largely due to an increased human resource headcount and costs as compared to the prior
fiscal year as well as infrastructure costs related to Elite label commercial activities resulting from the commercial launch of the
Elite label product line during the year ended March 31, 2024.
 
Non-cash
compensation expense for the year ended March 31, 2024 was $0.2 million as compared to $0.04 million for the prior fiscal year, an increase
of $0.1 million or approximately 307%, with such increase being attributed to the issuance to employees of options to purchase Common
Stock during the current fiscal year.
 
Depreciation
and amortization expenses from the year ended March 31, 2024 were $1.4 million as compared to $1.3 million for the prior fiscal year,
an increase of $0.1 million or approximately 9%. This increase is due to depreciation expense being recorded on an increased fixed asset
base which resulted from additional investments in capital manufacturing facilities.
 
As
a result of the foregoing, our income from operations during the year ended March 31, 2024 was $10.8 million, compared to income from
operations of $3.7 million for the prior fiscal year.
 
Other
income (expense):
 


  
For the Years Ended March 31,  
Change 

  
2024  
2023  
Dollars  
Percentage 

Other income (expense): 
    
    
    
   

Change in fair value of derivative financial instruments - warrants 
$(5,776,297) 
$415,126  
$(6,191,423) 
 (1491)%

Change in fair value of stock-based liabilities 
 (5,743,468) 
 —  
 (5,743,468) 
 100%

Interest expense and amortization of debt issuance costs 
 (588,622) 
 (1,112,707) 
 524,085  
 (47)%

Gain from settlement agreements 
 1,761,792  
 —  
 1,761,792  
 —%

Gain on sale of ANDA 
 —  
 1,000,000  
 (1,000,000) 
 (100)%

Interest income 
 20,918  
 7,453  
 13,465  
 181%

Other (expense) income, net 
$(10,325,677) 
$309,872  
$(10,635,549) 
 (3432)%

 

 49 
 

 
Other
income (expense) for the year ended March 31, 2024 was an other expense of $10.3 million, a decrease of $10.6 million from other income
of $0.3 million for the prior fiscal year. The decrease was primarily due to a net increases in other expenses totaling $12.9 million
and consisting of increased other expenses of $6.2 million relating to the change in fair value of warrant derivative instruments, $5.7
million relating to the change in fair value of stock-based liabilities and $1.0 million relating to gain on sale of ANDA, offset by
increases in other income totaling $2.3 million and consisting of $1.8 million gain from settlement agreements, $0.5 million relating
to decreased interest expense and amortization of debt issuance, and $0.01 million increase in interest income. The change in the fair
value of derivative instruments and stock-based liabilities is determined in large part by the change in the closing price of the Company’s
Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship
between the fair value of the Company’s derivative instruments and stock-based liabilities and decreases in the closing price of
the Company’s Common Stock. The decrease in interest expense associated with the loans payable is due in large part to the Company
paying off the principal balance of the EWB loan during the fiscal year ended March 31, 2023, resulting in no interest on the EWB loan
incurred for the year ended March 31, 2024. The increased other income from gain from settlement agreements is the result of there being
a settlement agreement during the fiscal year ended March 31, 2024 as compared to there being no settlement agreement during the comparable
period of the prior fiscal year. The decrease in other income relating to gain of sale of ANDA is the result of there being a sale of
an ANDA during the fiscal year ended March 31, 2023 as compared to no sales of ANDA occurring during the fiscal year ended March 31,
2024.
 
As
a result of the foregoing, our net income before income taxes for the year ended March 31, 2024 was $0.5 million, compared to net income
before income taxes of $4.0 million for the prior fiscal year.
 
Liquidity
and Capital Resources
 
Capital
Resources
 


  
March 31, 2024  
March 31, 2023  
Change 

Current assets 
$40,014,189  
$21,510,297  
$18,503,892 

Current liabilities 
$13,049,764  
$7,833,637  
$5,216,127 

Working capital 
$26,964,425  
$13,676,660  
$13,287,765 

 
The
Company considers cash and working capital balances as several of the factors the Company uses in evaluating its performance. As of March
31, 2024, the Company had cash on hand of $7.1 million and accounts receivable to be collected within expected operating cycles of $19.5
million. The Company believes that such resources, combined with the working capital surplus of $27.0 million and the continuation of
ongoing operations, are sufficient to fund operations through the next twelve months. For the year ended March 31, 2024, the Company
had income from operations totaling $10.8 million, net other expense totaling $10.3 million and a net income attributable to common shareholders
of $20.1 million. The Company’s other income (expense) and net income attributable to common shareholders are significantly influenced
by the fluctuations in the fair value of warrant derivatives with such fair value bearing a strong inverse correlation to the market
share price of the Company’s Common Stock as well as the recording of a discrete tax benefit of $17.3 million related to the Company’s release of the
valuation allowance against deferred tax assets related to U.S. federal net operating loss carryforwards and research and development
tax credits, which are expected to be realized based on demonstrated current profitability and the Company’s expectations of forecasted
income.
 
Our
working capital (total current assets less total current liabilities) increased by $13.3 million from $13.7 million as of March 31, 2023
to $27.0 million as of March 31, 2024, with such increase being primarily related to the increase in finished goods inventory and accounts
receivable, associated with increased customer orders during the year ended March 31, 2024 exceeding the increase in total current liabilities
over the same period.
 
Summary
of Cash Flows:
 


  
For the Years Ended March 31, 

  
2024  
2023 

Net cash (used in) provided by operating activities 
$(3,281,558) 
$3,338,704 

Net cash used in investing activities 
$(809,653) 
$(5,736,618)

Net cash provided by financing activities 
$3,385,624  
$1,702,199 

 
Net
cash used in operating activities for the year ended March 31, 2024 was $3.3 million, which included net income of $20.1 million, increased
by depreciation and other non-cash expenses totaling $11.5 million and reduced by the change in operating assets and liabilities totaling
$11.9 million and tax benefit of $20.0 million.
 
Net
cash provided by operating activities for the year ended March 31, 2023 was $3.3 million, which included net income of $3.6 million,
offset by non-cash (income) expenses totaling $1.8 million and net increases in assets and decreases in liabilities totaling $2.0 million.
 
Net
cash used in investing activities for the year ended March 31, 2024 was comprised of purchases of property and equipment of approximately
$0.8 million.
 
Net
cash used in investing activities for the year ended March 31, 2023 was comprised of purchases of property and equipment of $5.7 million.
 

 50 
 

 
Net
cash provided by financing activities was $3.4 million for the year ended March 31, 2024 which consisted primarily of proceeds from related
party loans payable totaling $4.0 million offset by payments of bond and loan principal totaling $0.3 million.
 
Net
cash provided by financing activities was $1.7 million for the year ended March 31, 2023 which contained proceeds and loan payments related
to the EWB mortgage loan and equipment loans.
 
Hakim
Promissory Note
 
The
Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but with
fewer restrictive covenants. These covenants include filing timely tax returns and financial statements, and an agreement not to sell,
lease, or transfer a substantial portion of the Company’s assets during the term of the note. On June 2, 2023, the Company entered
into a Promissory Note with Nasrat Hakim, CEO and Chairman of the Board of Directors, pursuant to which the Company borrowed funds in
the aggregate principal amount of $3,000,000 (the “Hakim Promissory Note”). The Hakim Promissory Note has an interest rate
of 9% for the first year and 10% for an optional second year and the proceeds were used for working capital and other business purposes.
The original maturity date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension. The second year extension
of the Hakim Promissory Note was agreed to by both parties, with the maturity date being extended to June 2, 2025.
 
Caskey
Promissory Note
 
On
June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory Note”).
The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9% for the first year and 10% for an optional
second year. The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory Note. The proceeds
were used for working capital and other business purposes. The original maturity date of the Caskey Promissory Note is June 30, 2024,
with both parties agreeing to the optional second year extension, as provided in the Caskey Promissory Note. The Caskey Promissory Note
has a current maturity date of June 30, 2025.
 
East
West Bank
 
On
April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”) with East
West Bank (“EWB”). Pursuant to the EWB Loan Agreement, the Company and Elite Labs received one term loan for a principal
amount of $12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $2,000,000 (the “EWB Revolver,”
together with the “EWB Term Loan,” the EWB Loans”), each of which shall be used for working capital. As of March 31,
2023, the principal and interest on the EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is terminated.
 
On
July 1, 2022, EWB provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $2.55 million for the purchase of the property
at 135-137 Ludlow Avenue, which was formerly a lease held by the Company. The EWB Mortgage Loan matures in 10 years and bears interest
at a rate of 4.75% fixed for 5 years then adjustable at WSJP plus 0.5% with floor rate of 4.5%. The total transaction costs associated
with the EWB Mortgage Loan incurred as of March 31, 2024, were $13,251, which are being amortized on a monthly basis over ten years,
beginning in July 2022. The EWB Mortgage Loan contains customary representations, warranties and covenants. These covenants include maintaining
a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum trailing 12-month debt coverage ratio of 1.50 to 1.00. As
of March 31, 2024, and through the date of filing of this quarterly report on Form 10-Q, the Company was not aware of the existence of
any violations of financial covenants included in the EWB Mortgage Loan.
 
Lincoln
Park Capital – July 8, 2020 Purchase Agreement
 
On
July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights
agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase
up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC
Purchase Agreement, at the Company’s direction. The 2020 LPC Purchase Agreement expired on August 1, 2023.
 
During
the years ended March 31, 2024 and 2023, the Company did not issue any shares of Common Stock to Lincoln Park.
 
NJEDA
Bonds
 
On
August 31, 2005, the Company successfully completed a refinancing of a prior 1999 bond issue through the issuance of new tax-exempt bonds
(the “Bonds”). The refinancing involved borrowing $4,155,000, evidenced by a 6.5% Series A Note in the principal amount of
$3,660,000 maturing on September 1, 2030 and a 9% Series B Note in the principal amount of $495,000 maturing on September 1, 2012. The
net proceeds, after payment of issuance costs, were used (i) to redeem the outstanding tax-exempt Bonds originally issued by the Authority
on September 2, 1999, (ii) refinance other equipment financing and (iii) for the purchase of certain equipment to be used in the manufacture
of pharmaceutical products. As of March 31, 2016, all of the proceeds were utilized by the Company for such stated purposes.
 

 51 
 

 
Interest
is payable semi-annually on March 1 and September 1 of each year. The Bonds are collateralized by a first lien on the Company’s
facility and equipment acquired with the proceeds of the original and refinanced Bonds. The related Indenture requires the maintenance
of a Debt Service Reserve Fund of $366,000 in relation to the Series A Notes.
 
Bond
issue costs of $354,454 were paid from the bond proceeds and are being amortized over the life of the bonds. Amortization of bond issuance
costs amounted to $14,185 for the fiscal year ended March 31, 2024.
 
The
NJEDA Bonds require the Company to make an annual principal payment on September 1st of varying amounts as specified in the loan documents
and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal at the applicable
rate for the semi-annual period just ended.
 
In
addition, the Company had previously received Notices of Default from the Trustee of the NJEDA Bonds as a result of the utilization of
the debt service reserve being used to pay interest payments as well as the company’s failure to make scheduled principal payments.
All monetary defaults were cured during Fiscal 2015 and the Company is current on all NJEDA Bond interest and principal payments. See
the Risk Factor in Part I, Item 1A entitled “We have substantial indebtedness which may adversely affect our financial condition
NJEDA Bonds”.
 
As
of the date of filing of this Annual Report on Form 10-K, there are no interest or principal amounts in arrears. The Series B Notes were
retired, at par in July 2014.
 
Recent
Developments
 
On
May 20, 2024, the Company reported that it received approval for the FDA for a generic version of Methotrexate Sodium 2.5mg tablets.
Methotrexate Sodium belongs to a class of drugs known as antimetabolites and will be sold under the Elite Laboratories Inc. label. As
of the date of filing of this Annual Report on Form 10-K, this product had not yet been commercially launched.
 
Off-Balance
Sheet Arrangements
 
We
have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or
capital resources that would be considered material to investors.
 
Effects
of Inflation
 
We
are subject to price risks arising from price fluctuations in the market prices of the products that we sell. Management does not believe
that inflation risk is material to our business or our consolidated financial position, results of operations, or cash flows.
 
Critical
Accounting Policies and Estimates
 
Our
significant accounting policies are disclosed in Note 1 of our Consolidated Financial Statements included elsewhere in this Annual Report
on Form 10-K. The following discussion addresses our most critical accounting policies, which are those that are both important to the
portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.
 
Use
of estimates
 
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
 

 52 
 

 
Revenue
Recognition
 
The
Company generates revenue from the development of pain management products, manufacturing of a line of generic pharmaceutical products
with approved ANDA, commercialization of products either by license and the collection of royalties, or through the manufacture of formulations
and the development of new products and the expansion of licensing agreements with other pharmaceutical companies, including co-development
projects, joint ventures and other collaborations. The Company also generates revenue through its focus on the development of various
types of drug products, including branded drug products which require NDAs.
 
Under
ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control
of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods
or services. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a
customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled
to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within
the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance
obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales,
value add, and other taxes collected on behalf of third parties are excluded from revenue.
 
Nature
of goods and services
 
The
following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature,
timing of satisfaction of performance obligations, and significant payment terms for each, as applicable:
 
a)
Manufacturing Fees
 
The
Company is equipped to manufacture immediate release and controlled release products that are sold under the Elite Laboratories Inc.
label (the “Elite Label”). The Company recognizes revenue when its customers obtain control of the Elite Labeled products.
These revenues are offset by variable consideration, which may include, without limitation, chargebacks, distribution fees, rebates,
group purchasing organization fees, prompt payment cash discounts, consideration payable to the customer, billbacks, Medicaid and other
government pricing programs, price protection and shelf stock adjustments, sales returns and profit shares. The Company’s estimates
for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change
in the amount of total consideration it expects to receive as well as updating estimate assumptions to reflect current and/or historical
trends.
 
Like
most competitors in this market, our marketing partners, or us in the case of prospective direct sales made by the Company, also give
credits for chargebacks to wholesalers that have contracts with our marketing partners, or us, prospectively, for their sales to hospitals,
group purchasing organizations, pharmacies, or other customers. A chargeback is the difference between the price the wholesaler pays
and the price that the wholesaler’s end-customer pays for a product. Although, our marketing partners establish, and prospectively
we would also establish reserves based on prior experience and best estimates of the impact that these policies may have in subsequent
periods, we cannot ensure that such reserves established are adequate or that actual product returns, rebates, allowances, and chargebacks
will not exceed estimates. Differences between established reserves and actual amounts of such credits and charges, could result in a
material adverse effect on our business, financial condition, results of operations, cash flow and stock price.
 
The
Company is also equipped to manufacture immediate release and controlled-release products on a contract basis for third parties, if and
when the products are approved. These products include products using immediate release technology, controlled-release drug technology
and products utilizing abuse deterrent technologies. The Company also develops and markets (either on its own or by license to other
companies) generic and proprietary controlled-release and abuse deterrent pharmaceutical products.
 

 53 
 

 
The
                                            Company recognizes revenue when the customer obtains control of the Company’s product
                                            based on the contractual shipping terms of the contract. Revenue on product are presented
                                            gross because the Company is primarily responsible for fulfilling the promise to provide
                                            the product, is responsible to ensure that the product is produced in accordance with the
                                            related supply agreement and bears risk of loss while the inventory is in-transit to the
                                            commercial partner. Revenue is measured as the amount of consideration the Company expects
                                            to receive in exchange for transferring products to a customer.
 
b)
License Fees
 
The
Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones
payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development agreements in
accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include payment to the Company
of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on
product sales.
 
If
the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative
standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone
selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable
through past transactions, the Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations.
 
The
Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated
intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular future events
(for example, payments due upon a product receiving FDA approval), the Company determined that these need to be considered for inclusion
in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method.
As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent
uncertainty of the occurrence of future events, the Company will not recognize revenue from the milestone until there is not a high probability
of a reversal of revenue, which typically occurs near or upon achievement of the event.
 
Significant
management judgment is required to determine the level of effort required under an arrangement and the period over which the Company
expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance
obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make
such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.
 
When
determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before
or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606-10-32-18,
the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations
under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing
component as of March 31, 2024.
 
In
accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs.
 
Accounts
Receivable and Allowance for Expected Credit Losses
 

Accounts
receivable are comprised of balances due from customers, net of estimated allowances for expected credit losses, and other contractual
deductions, including, without limitation, chargebacks, discounts and program rebates. In determining collectability, historical trends
are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
 

 54 
 

 
The
                                            allowance for expected credit losses is based on the probability of future collection under
                                            the current expected credited loss (“CECL”) impairment model under Accounting
                                            Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic
                                            326), Measurement of Credit Losses on Financial Assets, which was adopted by the Company
                                            on April 1, 2023, as discussed below within Recently Adopted Accounting Pronouncements. Under
                                            the CECL impairment model, the Company determines its allowance by applying a loss-rate method
                                            based on an aging schedule using the Company’s historical loss rate. The Company also
                                            considers reasonable and supportable current information in determining its estimated loss
                                            rates, such as external forecasts, macroeconomic trends or other factors including customers’
                                            credit risk and historical loss experience. The adequacy of the allowance is evaluated on
                                            a regular basis. Account balances are written off after all means of collection are exhausted
                                            and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance.
                                            Changes in the allowance are recorded as adjustments to credit losses in the period incurred.
 
Prior
to April 1, 2023, trade receivables were presented net of allowance for expected credit losses based on the credit risk of specific clients,
past collection history, and management’s evaluation of other risks. Expected credit losses stemming from unbilled receivables
expected to be billed between March 31, 2024 and March 31, 2028 include additional risk premiums estimated based on factors such as projected
inflation, projected decreases in GDP, and projected unemployment.
 
Income
Taxes
 
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce
any deferred tax assets that it determines will not be realizable in the future.
 
The
Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such
tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position.
These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
 
The
Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all
tax jurisdiction until the applicable statutes of limitation expire. As of March 31, 2024, a summary of the tax years that remain
subject to examination in our major tax jurisdictions are: United States – Federal, 2014 and forward, and State, 2010 and forward.
The Company did not have any unrecognized tax positions for the years ended March 31, 2024 and 2023.
 

 55 
 

 
Recently
Issued Accounting Pronouncements
 

In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”).
Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that
are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022
for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact
of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements.
 
In
December 2023, the FASB issued ASU 2023-09 (Topic 740), Improvements to income tax disclosures, which enhances the disclosure requirements
for the income tax rate reconciliation, domestic and foreign income taxes paid, requiring disclosure of disaggregated income taxes paid
by jurisdiction, unrecognized tax benefits, and modifies other income tax-related disclosures. The amendments are effective for annual
periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively. The Company is currently
evaluating the effect of adopting this guidance on its consolidated financial statements.
 
In
November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims
to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public
entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose
certain information about its reportable segments. Topic 280 also requires other specified segment items and amounts to be disclosed
under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a
public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine
its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal
years beginning after December 15, 2024. Early adoption is permitted. We do not expect that the requirements of ASU 2023 – 07 will
have a material impact on our consolidated financial statements.
 
Management
has evaluated recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant
impact on our consolidated financial statements and related disclosures.

 
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not
Applicable.
 
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Attached
hereto and filed as a part of this Annual Report on Form 10-K are our Consolidated Financial Statements, beginning on page F-1.
 
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 

 56 
 

 
ITEM
9A. CONTROLS AND PROCEDURES
 
Evaluation
of Disclosure Controls and Procedures
 
The
term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls
and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures based on the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control (“COSO”),
as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024 to ensure that
information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information
is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.
 
A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected on a timely
basis. As of March 31, 2024, we identified the following control deficiencies that we believe constituted individually, and in the aggregate,
material weaknesses in the design and operation components of our internal controls within the COSO framework:
 


 
●
    
We
    were unable to formalize and implement revised controls, policies and procedure documentation to evidence a system of internal
    controls, including testing of such revised controls, that was consistent with available personnel and resources;

 
 
 

 
●
    
We
    failed to maintain effective control activities over our control environment, risk assessment, information technology and monitoring
    components;

 
 
 

 
●
    
We
    had insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting
    functions due to limited personnel and resources.

 
Management’s
Annual Report on Internal Control Over Financial Reporting
 
Internal
control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief
Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles, and includes those policies and procedures that:(1) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
 
Internal
control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design
of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative
to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all
control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities
that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls
may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Accordingly,
given the inherent limitations in a system of internal control, financial statement misstatements due to error or fraud
may occur and may not be detected. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance
of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies
and procedures.
 

 57 
 

 
Management
is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting. Management has used the framework set forth in the report entitled “Internal
Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission
to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, utilizing those criteria,
management has determined that, as of March 31, 2024, because of the material weaknesses described above, our internal control over
financial reporting was not effective.
 

A material weakness is a deficiency, or combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis. As of March 31, 2024, we identified the following control deficiencies
that we believe constituted individually, and in the aggregate, material weaknesses in the design and operation components of our internal
controls within the COSO framework:
 



●
We
    were unable to formalize and implement revised controls, policies and procedure documentation to evidence a system of internal controls,
    including testing of such revised controls, that was consistent with available personnel and resources;

●
We
    failed to maintain effective control activities over our control environment, risk assessment, information technology and monitoring
    components;

●
We
    had insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting
    functions due to limited personnel and resources.


 
The
deficiencies in our internal controls over financial reporting and disclosure controls and procedures are described above and our efforts
to remediate these deficiencies are described below. Please also see Item 1A-Risk Factors: “We have identified material weaknesses
in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial
condition, cash flows and results of operations in a timely and fairly stated manner and/or increase the risk of future misstatements,
which could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause
the market value of our common shares and/or debt securities to decline.”
 
Changes
in Internal Controls Over Financial Reporting
 
During
the fiscal year ended March 31, 2024, as a result of reviews and assessments of internal controls over financial reporting conducted
by the Company’s CFO appointed on September 5, 2023 over the last seven month period ended March 31, 2024, the Company identified
material weaknesses in internal controls over financial reporting as further detailed above and began remediation efforts which are detailed
below, with such activities expected to result in further changes in internal control over financial reporting as necessary to remediate
the identified material weaknesses.
 
Remediation
efforts to address material weaknesses in internal controls over financial reporting
 
We
intend to revise the existing control environment documentation, designing and implementing controls, policies and procedure documentation
that is consistent with our current personnel, resources and capabilities, with significant focus on controls relating to financial oversight,
management, analysis and reporting of operations emanating from the Company’s manufacturing, marketing and distribution of its
Elite Laboratory label product line. Please note that these material weaknesses cannot be considered remediated until the applicable
remedial controls operate for a sufficient period of time, allowing management, through testing, to reach a conclusion on such controls
design and operational effectiveness.
 
Item
9B. OTHER INFORMATION.
 
During
the fiscal year ended March 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities
Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as
such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).
 
ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
 
None.
 

 58 
 

 
PART
III
 
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
The
following sets forth biographical information about each of our directors and executive officers as of the date of this report:
 


Name
 
Age
 
Position
 
Director/Officer
    Since
 
Director
    Class

Nasrat
    Hakim
 
63
 
President,
    Chief Executive Officer and Director
 
August
    2013
 
III

Barry
    Dash, Ph. D.
 
93
 
Director
 
April
    2005
 
II

Jeffrey
    Whitnell
 
68
 
Director
 
October
    2009
 
III

Davis
    Caskey
 
76
 
Director
 
April
    2016
 
I

Kirko
    Kirkov
 
56
 
Chief
    Commercial Officer
 
September
    2022
 
 

Douglas
    Plassche
 
60
 
Executive
    Vice President of Operations
 
August
    2013
 
 

Carter
    Ward 
 
60
 
Chief
    Financial Officer
 
September
    2023
 
 

 
The
principal occupations and employment of each Director and executive officer during the past five years is set forth below. In each instance
in which dates are not provided in connection with an individual’s business experience, such individual has held the position indicated
for at least the past five years.
 
Pursuant
to our amended and restated bylaws, our Board of Directors is classified into three separate classes of directors. Each director currently
holds office until the expiration of the term of his class (each for three years) and until his successor is duly elected and qualified,
or until such director’s death, resignation, or removal.
 
Nasrat
Hakim
 
Nasrat
Hakim has served as a Director, President, and Chief Executive officer since August 2013. He has been a member of the Audit Committee,
member and chairman of the nominating Committee and member of the Compensation Committee since September 2016. Mr. Hakim has more than
30 years of pharmaceutical and medical industry experience in Quality Assurance, Analytical Research and Development, Technical Services,
and Regulatory Compliance. He brings with him proven management experience, in-depth knowledge of manufacturing systems, development
knowledge in immediate and extended release formulations and extensive regulatory experience of GMP and FDA regulations. From 2004 to
2013, Mr. Hakim was employed by Actavis, Watson and Alpharma in various senior management positions. Most recently, Mr. Hakim served
as International Vice President of Quality Assurance at Actavis, overseeing 25 sites with more than 3,000 employees under his leadership.
Mr. Hakim also served as Corporate Vice President of Technical Services, Quality and Regulatory Compliance for Actavis U.S., Global Vice
President, Quality, and Regulatory Compliance for Alpharma, as well as Executive Director of Quality Unit at TheraTech, overseeing manufacturing
and research and development. In 2009, Mr. Hakim founded Mikah Pharma, LLC, a virtual, fully functional pharmaceutical company. Mr. Hakim
holds a Bachelor in Chemistry/Bio-Chemistry and Masters of Science in Chemistry from California State University at Sacramento, Sacramento,
CA; a Masters in Law with Graduate Certification in U.S. and International Taxation from St. Thomas University, School of Law, Miami,
FL.; and a Graduate Certification in Regulatory Affairs (RAC) from California State University at San Diego, San Diego, CA. Mr. Hakim’s
leadership experience (consisting of extensive experience in senior management positions, responsible for 25 global manufacturing/regulatory
sites with more than 3,000 employees under his leadership), industry experience (comprising more than 30 years of pharmaceutical and
medical industry experience served in various quality assurance, analytical research and development/technical services and compliance
positions) and academic experience (including Bachelor degrees in Chemistry and Bio-Chemistry, Masters degrees in Chemistry and Law,
with Graduate Certification in U.S. and International Taxation, and a Graduate Certification in Regulatory Affairs) led to the conclusion
that he is qualified to serve as a director.
 
Barry
Dash, Ph.D.
 
Dr.
Barry Dash has served as a Director since April 2005, member of the Audit Committee since April 2005, member of the Nominating Committee
since April 2005 and member and Chairman of the Compensation Committee since June 2007. Dr. Dash has been, since 1995, President and
Managing Member of Dash Associates, L.L.C., an independent consultant to the pharmaceutical and health industries. From 1983 to 1996
he was employed by Whitehall-Robins Healthcare, a division of American Home Products Corporation (now known as Wyeth), initially as Vice
President of Scientific Affairs, then as Senior Vice President of Scientific Affairs and then as Senior Vice President of Advanced Technologies,
during which time he personally supervised six separate departments: Medical and Clinical Affairs, Regulatory Affairs, Technical Affairs,
Research and Development, Analytical R&D and Quality Management/Q.C. Dr. Dash had been employed by the Whitehall Robins Healthcare
from 1960 to 1976, during which time he served as Director of Product Development Research, Assistant Vice President of Product Development
and Vice President of Scientific Affairs. Dr. Dash had been employed by J.B. Williams Company (Nabisco Brands, Inc.) from 1978 to 1982.
From 1976 to 1978 he was Vice President and Director of Laboratories of the Consumer Products Division of American Can Company. Dr. Dash
holds a Ph.D. from the University of Florida and M.S. and B.S. degrees from Columbia University where he was Assistant Professor at the
College of Pharmaceutical Sciences from 1956 to 1960. He is a member of the American Pharmaceutical Association, the American Association
for the Advancement of Science and the Society of Cosmetic Chemist, American Association of Pharmaceutical Scientists, Drug Information
Association, American Foundation for Pharmaceutical Education, and Diplomate American Board of Forensic Examiners. He is the author of
scientific publications and patents in the pharmaceutical field. Dr. Dash’s extensive education in pharmaceutical sciences and
his experience in the development of scientific products, including his experience in regulatory affairs, led to the conclusion that
he is qualified to serve as a director.
 

 59 
 

 
Jeffrey
Whitnell
 
Jeffrey
Whitnell has served as a Director since October 23, 2009, Chairman of the Audit Committee, member of the Compensation Committee since
October 2009 and designated by the Board as an “audit committee financial expert” as defined under applicable rules under
the Exchange Act. Since April 2015, Mr. Whitnell has provided financial advisory services, primarily to the healthcare industry, including
LifeWatch Services, where he served as the Vice President, Finance & Controller. From June 2010 to March 2015, Mr. Whitnell was the
Chief Financial Officer for ReliefBand Medical Technologies, a medical device company. From June 2009 to June 2010, Mr. Whitnell provided
financial advisory services to various healthcare companies, including ReliefBand Medical Technologies. From June 2004 to June 2009,
Mr. Whitnell was Chief Financial Officer and Senior Vice President of Finance at Akorn, Inc. From June 2002 to June 2004, Mr. Whitnell
was Vice President of Finance and Treasurer for Ovation Pharmaceuticals (acquired by Lundeck). From 1997 to 2001, Mr. Whitnell was Vice
President of Finance and Treasurer for MediChem Research (acquired by deCODE genetics). Prior to 1997, Mr. Whitnell held various finance
positions at Akzo Nobel and Motorola. Mr. Whitnell began his career as an auditor with Arthur Andersen & Co. He is a certified public
accountant and holds an M.B.A. in Finance from the University of Chicago Booth School of Business and a B.S. in Accounting from the University
of Illinois. Mr. Whitnell’s qualifications as an accounting and audit expert led to the conclusion that he is qualified to serve
as a director.
 
Davis
Caskey
 
Davis
Caskey has served as a Director since April 2016, and a member of the Audit Committee, the nominating Committee and the Compensation
Committee since September 2016. He brings more than 40 years of pharmaceutical industry experience to this position. Mr. Caskey is currently
President & CEO of Caskey LLC, which he formed in 2013 to serve as an umbrella to manage his pharmaceutical consulting and other
business interests. From 1990 to 2013, Davis served as the operating officer of ECR Pharmaceuticals, of which he was a founding member.
HiTech Pharmacal acquired the privately held ECR in 2009 and Mr. Caskey continued in his role until retiring in 2013. At ECR, Mr. Caskey
was credited with the establishment of the company’s sales and marketing structure, its product distribution format, and the development
and management of the firm’s internal organization. His responsibilities included the oversight of drug development and regulatory
filings, product acquisitions, and acquisition of other companies. A primary focus was to conceive and develop, with the assistance of
key strategic partners, unique dosage forms and extended release formulations of products which enhance patient compliance and safety.
Prior to ECR, Mr. Caskey was employed by A.H. Robins for 18 years in various field and home office management positions. His experience
brings critical insight into the marketing and distribution of pharmaceutical products in a rapid and ever-changing competitive marketplace,
and this experience led to the conclusion that he is qualified to serve as a director. Mr. Caskey attended the University of Texas (Austin)
and Lamar University, and holds bachelor’s and master’s degrees.
 
Kirko
Kirkov
 
Mr.
Kirkov joined Elite in September 2022, as an accomplished and multi-faceted leader with more than twenty years of in-depth business
development skills across international pharmaceutical organizations. Before joining Elite, Mr. Kirkov served as General Manager of Vertice
Pharma, a specialty generics pharmaceutical company, from February 2020 to present. From April 2008 to February 2020, Mr. Kirkov was
employed by Sandoz and served in positions of increasing responsibilities beginning with Country Head & Managing Director of Bulgaria
from 2008 to 2011. From 2011 to 2013, Mr. Kirkov served as Sandoz’s Business Unit Head, Branded Prescription Generics in Russia,
and most recently, from January 2013 to February 2020, served as Sandoz’s Executive Director, Commercial Operations. Mr. Kirkov
brings with him a broad range of experience in the areas of business development, operationalization of commercial strategy, and implementation
of retail and wholesale channel sales operations, having overseen sales portfolios consisting of 400+ product families, and 1,500+ SKUs
covering both generic and branded products.
 
Mr.
Kirkov has a Bachelor of Science in Mechanical Engineering/Engineering Management from the
University of Ottawa, two Masters of Science degrees respectively in Naval Architecture and Ocean Systems Management from the Massachusetts
Institute of Technology, a Master of Science in Applied Positive Psychology and Coaching from the University of East London, and an MBA
from the University of Durham.
 

 60 
 

 
Douglas
Plassche
 
Douglas
Plassche has served as Executive Vice President of Operations since August 2013. Prior to joining the Company, from 2009 to 2013, Mr.
Plassche served as the Managing Director of the New Jersey Solid Oral Dose Operations of Actavis, overseeing 450 employees and the production
of more than 100 products. From 2007 to 2009, Mr. Plassche was the Senior Director of Manufacturing for PAR Pharmaceuticals, overseeing
200 employees and the production of more than 70 products. From 1990 – 2007, Mr. Plassche was employed by Schering-Plough, progressing
steadily through multiple disciplines, locations, and technical operations sectors with increasing levels of responsibility. Mr. Plassche
has a bachelor’s degree in Economics from Rochester University.
 
Carter
Ward
 
Carter
Ward has served as Chief Financial Officer, Secretary and Treasurer of the Company since September 5, 2023. This is Mr. Ward’s
second tenure with the Company, previously serving in the same positions as currently from July 2009 through May 2021. In between Mr.
Ward’s roles with the Company, he served as Chief Financial Officer of Mirror Biologics, a privately held biotech organization
from September 2022 to July 2023 and as CFO of Enveric Biosciences, a NASDAQ listed biotech company, from May 2021 to September 2022.
Prior to initially joining the Company, from July 2005 to April 2009, Mr. Ward filled multiple finance and supply chain leadership roles
with the Actavis Group and its U.S. subsidiary, Amide Pharmaceuticals. From September 2004 to June 2005, Mr. Ward was a consultant, mainly
engaged in improving internal controls and supporting Sarbanes Oxley compliance of Centennial Communications Inc, a NASDAQ listed wireless
communications provider. Mr. Ward began his career as a certified public accountant in the audit department of KPMG. Mr. Ward holds a
B.S. in Accounting from Long Island University from where he graduated summa cum laude.
 
There
are no family relationships between any of our directors and executive officers.
 
Committees
of the Board
 
The
Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating Committee.
 
Audit
Committee
 
The
members of the Audit Committee are Jeffrey Whitnell (Chairman of the Audit Committee), Dr. Barry Dash, Davis Caskey and Nasrat Hakim.
The Board of Directors has determined that Messrs. Whitnell, Dash, and Caskey are independent and Mr. Whitnell is qualified as an audit
committee financial expert. The Board of Directors has determined that Messrs. Whitnell, Dash and Caskey are independent directors as
(i) defined in Rule 10A-3(b)(1)(ii) under the Exchange Act and (ii) under Sections 803A(2) and 803B(2)(a) of the NYSE American LLC Company
Guide (although our securities are not listed on the NYSE American LLC or any other national exchange).
 
Nominating
Committee
 
The
members of the Nominating Committee are Nasrat Hakim (Chairman of the Nominating Committee), Dr. Barry Dash, and Davis Caskey. There
were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since the filing
of our last Annual Report on Form 10-K.
 
Compensation
Committee
 
The
members of the Compensation Committee are Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey and
Nasrat Hakim.
 
Delinquent
Section 16 Reports
 
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than ten percent of a registered
class of the Company’s stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file.
 
Based
solely on its review of copies of such reports and upon written representations from each of the Company’s officers and directors,
the Company believes that, for the year ended March 31, 2024, all Section 16(a) filing requirements applicable to the Company’s
officers, directors and greater than ten percent stockholders were complied with on a timely basis.
 
Code
of Conduct and Ethics
 
At
the first meeting of the Board of Directors following the annual meeting of stockholders held on June 22, 2004, and as further updated
effective July 2009, the Board of Directors adopted a Code of Business Conduct and Ethics that is applicable to the Company’s directors,
officers, and employees. A copy of the Code of Business Conduct and Ethics is available on our website at www.elitepharma.com, under
Investor Relations.
 

 61 
 

 
ITEM
11. EXECUTIVE COMPENSATION
 
Role
of the Compensation Committee
 
The
Company formed the Compensation Committee in June 2007. Since the formation of the Compensation Committee all elements of the executives’
compensation are determined by the Compensation Committee, which currently is comprised of three independent non-employee directors,
and one director who is also the Company’s Chief Executive Officer. However, the Compensation Committee’s decisions concerning
the compensation of the Company’s Chief Executive Officer and equity awards are subject to ratification by the full Board of Directors.
The members of the Compensation Committee are Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey
and Nasrat Hakim. The Compensation Committee operates pursuant to a charter. Under the Compensation Committee charter, the Compensation
Committee has authority to retain compensation consultants, outside counsel, and other advisors that the committee deems appropriate,
in its sole discretion, to assist it in discharging its duties, and to approve the terms of retention and fees to be paid to such consultants.
During the fiscal year ended March 31, 2024, the Compensation Committee did not engage any advisors.
 
Named
Executive Officers
 
The
named executive officers for the fiscal year ended March 31, 2024 were:
 


 
●
    
Nasrat
    Hakim, Chief Executive Officer and President for the full year;

 
 
 

 
●
    
Douglas
    Plassche, Executive Vice President for the full year

 
 
 

 
●
    
Carter
    Ward, Chief Financial Officer since September 5, 2023

 
These
individuals are referred to collectively as the “Named Executive Officers”.
 
Our
Executive Compensation Program
 
Overview
 
Our
approach to executive compensation is driven by our belief in rewarding people for consistently strong execution and performance. We
believe that the ability to attract and retain qualified executive officers and other key employees is essential to our long-term success.
Our plan to obtain and retain highly skilled employees is to provide significant incentive compensation opportunities and market competitive
salaries. We strive to link individual employee objectives with overall company strategies and results, and to reward executive officers
and significant employees for their individual contributions to those strategies and results. Furthermore, we believe that equity ownership
serves to align the interests of our executives with those of our stockholders. As such, equity is a key component of our compensation
program.
 
The
primary elements of our executive compensation program are base salary, incentive cash and stock bonus opportunities and equity incentives
typically in the form of stock option grants or stock awards. Although we provide other types of compensation, these three elements are
the principal means by which we provide the Named Executive Officers with compensation opportunities.
 
Elements
of our executive compensation program
 
Base
Salary
 
We
pay a base salary to each of the Named Executive Officers. In general, base salaries for the Named Executive Officers are determined
by evaluating the responsibilities of the executive’s position, the executive’s experience, and the competitive marketplace.
Base salary adjustments are considered and take into account changes in the executive’s responsibilities, the executive’s
performance, and changes in the competitive marketplace. We believe that the base salaries of the Named Executive Officers are appropriate
within the context of the compensation elements provided to the executives and because they are at a level which remains competitive
in the marketplace.
 
In
the section below entitled “Agreements with Named Executive Officers”, we describe the breakdown between compensation
paid in cash and in equity for each Named Executive Officer during the fiscal year ended March 31, 2024.
 
Bonuses
 
Named
Executive Officers may earn discretionary bonuses, which are awarded by the Compensation Committee in its discretion after the end of
a fiscal year based on its assessment of factors including Company and individual performance. In addition, as described in the section
below entitled “Agreements with Named Executive Officers,” Mr. Plassche received a cash bonus of $165,032 during the
fiscal year ended March 31, 2024, and a retention bonus of $150,000. Mr. Ward assumed his position as Chief Financial Officer on September
5, 2023 and was not paid a cash bonus during the fiscal year ended March 31, 2024.
 

 62 
 

 
Equity
 
In
addition to cash compensation, our Named Executive Officers from time to time are granted stock options. During the fiscal year ended
March 31, 2024, in connection with his initial employment, Mr. Ward was granted options to purchase 3,000,000 shares of common stock
at a price of $0.0898 per share. All options granted include vesting periods consisting of one-third of total options granted vesting
on each of the first, second and third anniversaries of the grant date, with current employment being a requisite for all vesting. Options
granted expire the earlier of ten years from the grant date or 90 days subsequent to the employee’s last date of employment.
 
Retirement
Benefits
 
We
maintain a tax-qualified retirement plan under Section 401(k) of the Code. The plan allows employees to defer compensation on a pre-tax
basis subject to certain limits; however, Elite does not provide a matching contribution to its participants.
 
Perquisites
 
Mr.
Hakim receives a monthly car allowance of up to $1,500 pursuant to the terms of his employment agreement. Mr. Plassche receives a monthly
car allowance of up to $500. Mr. Hakim is also entitled to a monthly housing allowance up to $5,000. The value of the perquisites we
provide are taxable to the Named Executive Officers and the incremental cost to us of providing these perquisites are reflected in the
Summary Compensation Table. The Board of Directors believes that the perquisites provided are reasonable and appropriate. The Company
generally covers life insurance premiums for its employee population, including its Named Executive Officers. For more information on
perquisites provided to the Named Executive Officers, please see the “All Other Compensation” column of the Summary
Compensation Table.
 
Agreements
with Named Executive Officers
 
Nasrat
Hakim
 
Pursuant
to his August 2013 employment agreement, as amended on January 12, 2016 and September 26, 2023 (the “Hakim Employment Agreement”),
as of April 1, 2023, Mr. Hakim receives an annual salary of $1,000,000 per year payable in accordance with the Company’s payroll
practices. The Board may also award discretionary bonuses in its sole discretion. Mr. Hakim is entitled to employee benefits (e.g., health,
vacation, employee benefit plans and programs) consistent with other Company employees of his seniority, a car allowance of $1,500 and
housing allowance of $5,000 per month, respectively. The Hakim Employment Agreement contains confidentiality, non-competition and other
standard restrictive covenants.
 
Mr.
Hakim’s employment is terminable by the Company for cause (as defined in the Hakim Employment Agreement). The Hakim Employment
Agreement also may be terminated by the Company upon at least 30 days written notice due to disability (as defined in the Hakim Employment
Agreement) or without cause. Mr. Hakim can terminate the Hakim Employment Agreement by resigning, provided he gives notice at least 60
days prior to the effective resignation date.
 
If
Mr. Hakim is terminated for cause or he resigns, he only is entitled to accrued and unpaid annual salary, accrued vacation time and any
reasonable and necessary business expenses, all through the date of termination (“Basic Termination Benefits”). If Mr. Hakim
is terminated because of disability or death, in addition to Basic Termination Benefits, he is entitled to a pro rata discretionary bonus,
if any, as awarded by the Board in its sole discretion, from the beginning of the calendar year of termination through the date of termination,
payable in a lump sum. In addition, in the event of the termination of Mr. Hakim’s employment due to his disability, he will be
entitled to a lump sum payment within 60 days of the termination date equal to one year of his base salary, subject to his execution
of a release. If the Company terminates Mr. Hakim without cause, in addition to Basic Termination Benefits, Mr. Hakim is entitled to
his pro rata discretionary bonus, if any, as awarded by the Board in its sole discretion, from the beginning of the calendar year of
termination through the date of termination and an amount equal to two years’ annual base salary, all payable in a lump sum within
60 days of the termination date, and 12 months of continued health insurance continuation under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), at active employee rates, subject to his execution of a release and his continued compliance
with applicable restrictive covenants.
 
Upon
a termination of employment in connection with a Change of Control (as defined below), in addition to Basic Termination Benefits, Mr.
Hakim is entitled to a pro rata discretionary bonus and payment in an amount equal to two year’s base annual salary in effect upon
the Date of Termination, less applicable deductions, and withholdings, in a lump sum within 60 days, and two years of health care continuation
benefits. In addition, all outstanding unvested equity held by Mr. Hakim will then vest.
 

 63 
 

 
Under
the Hakim Employment Agreement:
 
“Cause”
means (1) Mr. Hakim’s failure or refusal to perform the services required under the agreement, (2) the material breach by Mr. Hakim
of any of the terms of the agreement, or (3) Mr. Hakim’s conviction of a crime that results in imprisonment or involves embezzlement,
dishonest or activities injurious to the Company or its reputation.
 
“Change
of Control” means generally (1) an acquisition or merger resulting in the holders of the Company’s voting stock immediately
prior to the transaction holding less than fifty (50%) percent of the combined voting power after the transaction; (2) the sale of all
or substantially all of the assets or capital stock of the Company; or (3) the securities of the Company representing greater than fifty
(50%) percent of the combined voting power of the Company’s then outstanding voting securities are acquired in a single transaction
or series of related transactions.
 
“Disability”
means that Mr. Hakim is prevented by illness, accident or other disability (mental or physical) from performing the essential functions
of his position for one or more periods cumulatively totaling 3 months during any consecutive 12 month period.
 
Douglas
Plassche
 
On
July 20, 2013, the Company entered into an employment agreement with Mr. Douglas Plassche (the “Plassche Employment Agreement”).
Pursuant to the Plassche Employment Agreement, Mr. Plassche serves as an at-will employee, in the position of Vice President of Operations,
commencing on August 12, 2013. The Plassche Employment Agreement includes an initial base salary of $205,000 being paid in accordance
with the Company’s payroll practices and an annual stock award in an amount equal to $25,000. The Common Stock component of Mr.
Plassche’s compensation is to be computed on an annual basis, with the number of shares issued being equal to the quotient of the
annual amount due, divided by the average daily closing price of the Company’s Common Stock for the calendar year just ended.
 
Mr.
Plassche is also eligible for an annual bonus in cash and/or equity-based awards, with such annual bonus being awarded based upon the
achievement of agreed milestones and at the discretion of the Company and its Chief Executive Officer. In addition, pursuant to the Plassche
Employment Agreement, Mr. Plassche was initially granted options to purchase 3,000,000 shares of Common Stock, at a price of $ 0.07 per
share, (the closing price of the Common Stock on the date of the Plassche Employment Agreement). The options were issued pursuant to
the 2004 Employee Stock Option Plan and vested over a period of three years with the vesting period commencing one year from the date
of issuance and expired, unexercised, ten years from the date of issuance in July of 2023.
 
Mr.
Plassche is entitled to a monthly automobile allowance of $500.
 
Mr.
Plassche’s employment is terminable by either party. If the Company terminates Mr. Plassche without cause, Mr. Plassche is entitled
to an amount equal to six months of base annual salary in effect upon the date of termination.
 
Throughout
his tenure, Mr. Plassche’s compensation was increased from time to time by the Board and the annual stock award was removed.
 
On
March 1, 2024, Mr. Plassche’s compensation was adjusted to include an annual salary of $346,567 payable in accordance with the
Company’s payroll practices.
 
On
February 18, 2022, Mr. Plassche entered into a second retention agreement with the Company (the “2022 Plassche Retention Agreement”),
as an incentive for his continued employment and cooperation during a transitional period for the Company. Pursuant to the 2022 Plassche
Retention Agreement, Mr. Plassche is entitled to a $150,000 retention payment on each of October 31, 2022 and June 30, 2023, subject
in each case to his continued employment through such date. The retention payments have been made to Mr. Plassche in accordance with
2022 Plassche Retention Agreement.
 
Carter
Ward
 
On
September 5, 2023, the Company entered into an employment agreement with Mr. Carter Ward, effective as of September 5, 2023 to served
as the Company’s Chief Financial Officer (the “Ward Employment Letter”). Pursuant to the Ward Employment Letter, Mr.
Ward receives an annual base salary of $275,000, guaranteed annual bonus equal to 20% of annual base salary and is eligible to receive
additional performance bonuses of up to 30% of annual base salary as determined from time to time by the Company’s Board of Directors.
In addition and also pursuant to the Ward Employment Letter, the Company’s Board of Directors approved the grant of options to
purchase 3,000,000 shares of Common Stock at a price equal to the closing price of the Company’s Common Stock on the first date
of Mr. Ward’s employment pursuant to the Ward Employment Letter.
 
The
Ward Employment Agreement will remain in effect until terminated by either party with at least 60 days advance written notice. In addition,
the Ward Employment Agreement is subject to early termination by Mr. Ward or the Company in accordance with the terms of the Ward Employment
Agreement.
 

 64 
 

 
Pursuant
to the Ward Agreement, if Mr. Ward’s employment is terminated by the Company without cause, then the Company must pay Mr. Ward,
in addition to any then-accrued and unpaid obligations owed to him, severance payments equal to two months of his then-current base salary
for each year of service, up to a maximum of 12 months, and 12 months of continued health insurance continuation under COBRA, at active
employee rates, in each case, subject to his execution of a release and his compliance with applicable restrictive covenants.
 
The
Ward Employment Agreement also contains covenants restricting Mr. Ward from soliciting the Company’s employees or customers during
his employment and for a period of 12 months after the termination of Mr. Ward’s employment with the Company and prohibiting him
from disclosure of confidential information regarding the Company at any time.
 
Potential
Payments Upon Termination or Change of Control
 
Messrs.
Hakim, Plassche and Ward are entitled to certain benefits upon a termination event (and in the case of Mr. Hakim, in connection with
a change of control), as described in the section entitled “Agreements with Named Executive Officers” above. We
do not presently provide the Named Executive Officers with any plan or arrangement, other than those that may be contained in the employment
contracts disclosed above, in connection with any termination, including, without limitation, through retirement, resignation, severance,
or constructive termination (including a change in responsibilities) of such Named Executive Officer’s employment with the Company.
 
As
part of the Company’s efforts to ensure the retention and continuity of key employees, officers, and directors in the event of
a change of control of the ownership of the Company, unless otherwise stated in applicable employment contracts, key executives would
receive an amount not to exceed twelve months of such executive’s salary, and certain Directors and managers would receive an amount
equal to six months of such Director’s or manager’s fees or salaries, as applicable. In addition, any outstanding and unvested
options would immediately vest, in the event of a change of control.
 
Summary
Compensation Table
 


Name
    and Principal Position 
Fiscal
Year  
Salary
($)  
Bonus
($)  
Option
Awards
($)
                                            11  
All
Other
Compensation
($)  
Total
($) 

Nasrat
    Hakim, President, 
 2024  
 1,000,0001 
 —2 
 —  
 78,0003 
 1,078,000 

Chief
    Executive Officer and Chairman of the Board of Directors 
 2023  
 500,0001 
 499,9922 
 —  
 78,0003 
 1,077,992 

  
    
    
    
    
    
   

Douglas
    Plassche, 
 2024  
 331,4404 
 315,0325 
 —  
 6,0007 
 652,472 

Executive
    Vice President 
 2023  
 302,5604 
 232,0005 
 187,0556 
 6,0007 
 727,615 

  
    
    
    
    
    
   

Carter
    Ward, 
 2024  
 158,4779 
 —  
 255,01810 
 —  
 383,495 

Chief
    Financial Officer8 
 2023  
 —  
 —  
 —  
 —  
 — 


 


 
1
Represents
    salary earned by Mr. Hakim pursuant to the Hakim Employment Agreement for the fiscal years ended March 31, 2024 and 2023. Salaries
    earned during the fiscal year ended March 31, 2024 were paid in accordance with the Company’s payroll practices. Salaries earned
    during the fiscal year ended March 31, 2023 were to be paid via the issuance of Common Stock in lieu of cash. No shares were issued
    in payment of salaries earned during the fiscal year ended March 31, 2023. In aggregate a total of $3,125,000 was owed to Mr. Hakim
    for salaries earned but unpaid for all prior years through and including the fiscal year ended March 31, 2023. On March 29, 2024,
    a total of 49,534,368 shares of Common Stock were issued in full satisfaction pursuant to the Hakim Employment Agreement for this
    amount

 
 
 

 
2
Represents
    bonus earned by Mr. Hakim for the fiscal years ended March 31, 2024 and 2023, respectively, and paid in accordance with the Company’s
    payroll practices.

 
 
 

 
3
Represents
    annual auto and housing allowances of $18,000 and $60,000, respectively.

 
 
 

 
4
Represents
    salaries earned by Mr. Plassche pursuant to the Plassche Employment Agreement and paid in accordance with the Company’s payroll
    practices.

 

 65 
 

 


 
5
Represents
    cash bonuses earned pursuant to the Plassche Employment Agreement and retention bonuses earned pursuant to the 2022 Plassche Retention
    Agreement and paid in accordance with the Company’s payroll practices.

 
 
 

 
6
Represents
    options to purchase 7,500,000 shares of Common Stock at a price of $0.03 per share with the grant date fair value of such option awards being determined using the Black Scholes option-pricing model.

 
 
 

 
7
Represents
    annual auto allowances.

 
 
 

 
8
Mr.
    Ward has served as the Company’s Chief Financial Officer since September 5, 2023.

 
 
 

 
9
Represents
    salaries earned by Mr. Ward pursuant to the Ward Employment Agreement and paid in accordance with the Company’s payroll practices.

 
 
 

 
10
Represents
    options to purchase 3,000,000 shares of Common Stock at a price of $0.0898 per share with the grant date fair value of such option awards being determined using the Black Scholes option-pricing model.

 
 
 

 
11
The
    amounts in these columns reflect the grant date fair value of stock option awards computed in accordance with FASB ASC Topic 718,
    excluding the effect of estimated forfeitures. See Note 13 to the Consolidated Financial Statements contained in the Company’s
    report on Form 10-K for the fiscal year ended March 31, 2024 for the assumptions used in the valuations that appear in this column.

 
Outstanding
Equity Awards as of March 31, 2024
 


Name 
Number of securities underlying unexercised options Exercisable (#)  
Number of securities underlying unexercised options Unexercisable (#)  
Options Exercise Price ($)  
Option Expiration Date

Douglas Plassche 
 2,500,000  
 5,000,0001 
$0.03  
1/3/2033

Carter Ward 
 —  
 3,000,0002 
$0.0898  
9/5/2033

Nasrat Hakim 
 —  
 —  
    
 

 


 
1
Options
    vest in equal annual increments of 2,500,000 shares on January 3, 2024, January 3, 2025 and January 3, 2026.

 
 
 

 
2
Options
    vest in equal annual increments of 1,000,000 shares on September 5, 2024, September 5, 2025 and September 5, 2026

 
Director
Fee Compensation
 
The
Company’s policy regarding director fees is as follows: (i) Directors who are employees or consultants of the Company (and/or any
of its subsidiaries), including Mr. Hakim, receive no additional remuneration for serving as directors or members of committees of the
Board; (ii) all Directors are entitled to reimbursement for out-of-pocket expenses incurred by them in connection with their attendance
at the Board or committee meetings; (iii) Directors who are not employees or consultants of the Company (and/or any of its subsidiaries)
receive a $30,000 annual retainer fee, payable in cash (iv) Directors do not receive any additional compensation for attendance at or
chairing of any meetings.
 

 66 
 

 
Director
Compensation
 
The
following table sets forth information concerning director compensation for the year ended March 31, 2024:
 


Name 
Fees Earned or Paid In Cash 1 ($)  
Stock Awards1 ($)  
Total ($) 

Barry Dash 
 30,0002 
 —  
 30,000 

Jeffrey Whitnell 
 30,0002 
 —  
 30,000 

Davis Caskey 
 30,0002 
 —  
 30,000 

 


 
1
Please
    refer to the section below titled “Director Fee Compensation” for details on the Company’s director fee compensation
    policy. No directors held unexercised or unvested stock or option awards as of March 31, 2024.

 
 
 

 
2
Amounts
    represent Director fees earned during the fiscal year ended March 31, 2024 payable in cash.

 
Other
 
The
Company’s Articles of Incorporation, as amended, provide for the indemnification of each of the Company’s directors to the
fullest extent permitted under Nevada General Corporation Law.
 
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The
following table sets forth certain information, as of June 26, 2024 (except as otherwise
indicated), regarding beneficial ownership of our Common Stock by (i) each person who is known by us to own beneficially more than 5%
of each such class, (ii) each of our directors, (iii) each of our executive officers and (iv) all our directors and executive officers
as a group. As of June 26, 2024 we had 1,068,273,108 shares of Common Stock outstanding
(exclusive of 0.1 million treasury shares). On any matter presented to the holders of our Common Stock for their action or consideration
at any meeting of our Shareholders, each share of Common Stock entitles the holder to one vote.
 
As
used in the table below and elsewhere in this report, the term beneficial ownership with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote, and/or sole or shared investment power, including the power to dispose
or direct the disposition, with respect to the security through any contract, arrangement, understanding, relationship, or otherwise,
including a right to acquire such power(s) during the 60 days immediately following June 23, 2023. Except as otherwise indicated, the
Shareholders listed in the table have sole voting and investment powers with respect to the shares indicated.
 


Name and
    Address of Beneficial Owner of Common Stock 
Common
    
    Stock  
Percent
                                            (%) of Voting
                                            Securities Beneficially Owned 

Nasrat Hakim, President, Chief
    Executive Officer and Chairman of the Board of Directors* 
 300,581,058(1) 
 26.3%

Barry Dash, Director* 
 3,235,555(2) 
 **%

Jeffrey Whitnell, Director* 
 3,187,020(3) 
 **%

Davis Caskey, Director* 
 2,049,436(4) 
 **%

Douglas Plassche, Executive Vice President
    * 
 3,633,932(5) 
 **%

Carter Ward, Chief Financial Officer 
 4,990,445(6) 
 **%

All Directors and Officers
    as a group 
 317,677,446(7) 
 27.8%

 


*
    
The
    address is c/o Elite Pharmaceuticals Inc., 165 Ludlow Avenue, Northvale, NJ 07647.

 
 

**
    
Less
    than 1%

 
 

(1)
    
Includes
    219,349,250 shares of Common Stock held by Mr. Hakim and 2,223,147 shares of Common Stock held by Mr. Hakim’s spouse and 79,008,661
    shares of Common Stock issuable upon cash exercise of the Series J Warrants with an exercise price of $0.1521 per share.

 
 

(2)
    
Includes
    3,235,555 shares of Common Stock held by Dr. Dash

 
 

(3)
    
Includes
    3,187,020 shares of Common Stock held by Mr. Whitnell

 
 

(4)
    
Includes
    2,049,436 shares of Common Stock held by Mr. Caskey.

 
 

(5)
    
Includes
    1,133,932 shares of Common Stock held by Mr. Plassche and shares of Common Stock issuable upon cash exercise of vested options to
    purchase 2,500,000 shares of Common Stock and excludes 5,000,000 shares issuable upon exercise of options not vested or not exercisable
    within the next 60 days.

 
 

(6)
    
Includes
    4,990,445 shares of Common Stock held by Mr. Ward and excludes 3,000,000 shares issuable upon exercise of options not vested or not
    exercisable within the next 60 days.

 
 

(7)
    
Relates
    only to current directors and officers. Includes 236,168,785 shares of Common Stock held, 2,500,000 shares of Common Stock issuable
    upon cash exercise of vested options and 79,008,661 shares of Common Stock issuable upon cash exercise of warrants at an exercise
    price of $0.1521 per share of Common Stock, and excludes 8,000,000 shares issuable upon exercise of options not vested or not exercisable
    within the next 60 days.

 

 67 
 

 
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Certain
Related Person Transactions
 
In
May 2020, Praxgen, under an asset purchase agreement, assigned its rights and obligations under the Praxgen Agreement for Amphetamine
IR and Amphetamine ER to Mikah. The ANDAs for Amphetamine IR and Amphetamine ER are now registered under Elite’s name. Mikah is
now Elite’s partner with respect to Amphetamine IR and ER and has assumed all the rights and obligations for these products from
Praxgen. Mikah was founded in 2009 by Nasrat Hakim.
 
Director
Independence
 
All
related person transactions are reviewed and, as appropriate, may be approved or ratified by the Board of Directors. If a Director is
involved in the transaction, he or she may not participate in any review, approval, or ratification of such transaction. Related person
transactions are approved by the Board of Directors only if, based on all of the facts and circumstances, they are in, or not inconsistent
with, our best interests and the best interests of our stockholders, as the Board of Directors determines in good faith. The Board of
Directors takes into account, among other factors it deems appropriate, whether the transaction is on terms generally available to an
unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
The Board of Directors may also impose such conditions as it deems necessary and appropriate on us or the related person in connection
with the transaction.
 
In
the case of a transaction presented to the Board of Directors for ratification, the Board of Directors may ratify the transaction or
determine whether rescission of the transaction is appropriate.
 
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The
Company’s independent registered public accounting firm for the fiscal year ending March 31, 2024 is Forvis Mazars LLP (“Forvis
Mazars”). The Company’s independent registered public accounting firm for the fiscal year ended March 31, 2023 was Buchbinder
Tunick & Company LLP (“Buchbinder”).
 
The
following table presents fees, including reimbursements for expenses, for professional audit services rendered by Forvis Mazars (or its
predecessor), for the fiscal year ended March 31, 2024, and Buchbinder, for the fiscal year ended March 31, 2023 for the audits of our
financial statements and interim reviews of our quarterly financial statements.
 


  
Fiscal 2024  
Fiscal 2023 

Audit Fees - Buchbinder Tunick & Company LLP 
$—  
$120,000 

Audit Fees - Mazars USA LLP 
$245,440  
$— 

Audit Fees - Forvis Mazars, LLP 
$60,000  
$— 

Audit-Related Fees 
$—  
$— 

Tax Fees 
$—  
$— 

 
Audit
Fees
 
Represents
fees for professional services provided for the audit of our annual financial statements, services that are performed to comply with
generally accepted auditing standards, and review of our financial statements included in our quarterly reports and services in connection
with statutory and regulatory filings.
 
Audit-Related
Fees
 
Represents
the fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements.
 
Pre-Approval
Procedures
 
The
Audit Committee pre-approves all audit related and tax services and the terms thereof (which may include providing comfort letters in
connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the
Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent
auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the
“de minimus” provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit
services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to
the full Audit Committee at its first meeting following such decision.
 

 68 
 

 
PART
IV
 
ITEM
15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
 
(a)
The following are filed as part of this Annual Report on Form 10-K
 
(1)
The financial statements and schedules required to be filed by Item 8 of this Annual Report on Form 10-K and listed in the Index to Consolidated
Financial Statements.
 
(2)
The Exhibits required by Item 601 of Regulation S-K and listed below in the “Index to Exhibits required by Item 601 of Regulation
S-K.”
 
(b)
The Exhibits are filed with or incorporated by reference in this Annual Report on Form 10-K
 
(c)
None
 
Index
to Exhibits required by Item 601 of Regulation S-K.
 



Exhibit
    No.
 
Description

3.1(a)
 
Articles
    of Incorporation of Elite-Nevada, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on
    January 9, 2012.

3.1(b)
 
Certificate
    of Designations of the Series G Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on April
    18, 2013, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC
    on April 22, 2013.

3.1(c)
 
Certificate
    of Designation of the Series H Junior Participating Preferred Stock, incorporated by reference to Exhibit 2 (contained in Exhibit
    1) to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013.

3.1(d)
 
Certificate of Designations of the Series I Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on February 6, 2014, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014.

3.1(e)
 
Certificate
    of Designations of the Series J Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on May 3,
    2017, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on
    April 28, 2017.

3.1(f)
 
Certificate
    of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated June
    29, 2020 and filed with the SEC on June 29, 2020.

3.2(a)
 
Amended
    and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K dated April 23, 2020
    and filed with the SEC on April 23, 2020.

4.1
 
Form
    of specimen certificate for Series G Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the
    Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013.

4.2
 
Form
    of specimen certificate for Series I Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the
    Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014.

4.3
 
Rights
    Agreement, dated as of November 15, 2013, between the Company and American Stock Transfer & Trust Company, LLC., incorporated
    by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013.

4.4
 
Form
    of Series H Preferred Stock Certificate, incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with
    the SEC on November 15, 2013.

4.5
 
Warrant
    to purchase shares of Common Stock issued to Nasrat Hakim dated April 28, 2017 incorporated by reference to Exhibit 4.1 to the Current
    Report on Form 8-K, dated April 28, 2017, and filed with the SEC on April 28, 2017.

4.6
 
Description
    of Common Stock, incorporated by reference to Exhibit 4.6 to the Annual Report on Form 10-K, filed with the SEC on June 29, 2020

10.1*
 
Elite Pharmaceuticals, Inc. Restated 2014 Equity Incentive Plan.

10.2
 
Form of Confidentiality Agreement (corporate), incorporated by reference to Exhibit 10.7 to the Form SB-2.

10.3
 
Form of Confidentiality Agreement (employee), incorporated by reference to Exhibit 10.8 to the Form SB-2.

10.4
 
Loan
    Agreement, dated as of August 15, 2005, between New Jersey Economic Development Authority (“NJEDA”) and the Company,
    incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September
    6, 2005.

  

69
 

 


10.5
 
Series
    A Note in the aggregate principal amount of $3,660,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit
    10.2 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.

10.19
 
August
    1, 2013 Secured Convertible Note from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.2 to the Current
    Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.

10.20
 
August
    1, 2013 Security Agreement from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.3 to the Current Report
    on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.

10.21
 
October
    15, 2013 Hakim Credit Line Agreement, incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q for the period
    ended September 30, 2013.

10.22
 
October
    2, 2013 Manufacturing and Licensing Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.17 to the Amended Quarterly
    Report on Form 10-Q/A for the period ended September 30, 2013 and filed with the SEC on April 25, 2014. Confidential Treatment granted
    with respect to portions of the Agreement.

10.23
 
February
    7, 2014 Amendment to Secured Convertible Note from the Company to Mikah, incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K, dated February 7, 2014 and filed with the SEC on February 7, 2014.

10.24
 
Employment
    Agreement with Dr. G. Kenneth Smith, dated October 20, 2014, incorporated by reference to Exhibit 10.82 to the Quarterly Report on
    Form 10-Q for the period ended September 30, 2014 and filed with the SEC on November 14, 2014.

10.25
 
January
    28, 2015 First Amendment to the Loan Agreement between Nasrat Hakim and Elite Pharmaceuticals dated October 15, 2013, incorporated
    by reference to Exhibit 10.83 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC
    on February 17, 2015.

10.26
 
January
    28, 2015 Termination of Development and License Agreement for Mikah-001 between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC
    and Transfer of Payment, incorporated by reference to Exhibit 10.84 to the Quarterly Report on Form 10-Q for the period ended December
    31, 2014 and filed with the SEC on February 17, 2015.

10.27
 
June
    4, 2015 License Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.85 to Amendment No. 1 to the Annual Report
    on Form 10-K for the fiscal year ended March 31, 2015 and filed with the SEC on July 11, 2016. (Confidential Treatment granted with
    respect to portions of the Agreement).

10.28
 
Amendment
    No. 1 to Hakim Employment Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC
    on January 29, 2016.

10.29
 
August
    24, 2016 Master Development and License Agreement between Elite and SunGen Pharma LLC. incorporated by reference to Exhibit 10.44
    to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016. (Confidential
    Treatment granted with respect to portions of the Agreement).

10.30
 
Purchase
    Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017.

10.31
 
Registration
    Rights Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.2 to
    the Current Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017.

10.32
 
April
    28, 2017 Exchange Agreement between the Company and Nasrat Hakim, incorporated by reference to Exhibit 10.1 to the Current Report
    on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28. 2017.

10.33
 
May
    2017 Trimipramine Acquisition Agreement from Mikah Pharma, incorporated by reference to Exhibit 10.50 to the Annual Report on Form
    10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.

10.34
 
May
    2017 Secured Promissory Note from the Company to Mikah Pharma, incorporated by reference to Exhibit 10.51 to the Annual Report on
    Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.

10.35
 
May
    2017 Security Agreement between the Company to Mikah Pharma, incorporated by reference to Exhibit 10.52 to the Annual Report on Form
    10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.

10.36
 
May
    2017 Assignment of Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference
    to Exhibit 10.53 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.

10.37
 
May
    2017 Assignment of Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.54 to
    the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.

  

70
 

 


10.38
 
Supply
    and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.55 to
    the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment
    granted with respect to portions of the Agreement).

10.39
 
Manufacturing
    and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K,
    for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions
    of the Agreement).

10.40
 
Master
    Development and License Agreement For Products Between Elite Pharmaceuticals, Inc. And SunGen dated July 6, 2017, incorporated by
    reference to Exhibit 10.57 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August
    9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).

10.41
 
First
    Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated
    by reference to Exhibit 10.59 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August
    9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).

10.42
 
Second
    Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated
    by reference to Exhibit 10.58 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August
    9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).

10.43
 
May
    22, 2018 License, Manufacturing and Supply Agreement with Glenmark Pharmaceuticals Inc. USA, incorporated by reference to Exhibit
    10.60 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and filed with the SEC on June 14, 2018. (Confidential
    treatment granted with respect to portions of the Agreement).

10.44
 
August
    1, 2018 Amendment to the Glenmark Pharmaceuticals Inc. USA License, Supply and Distribution Agreement, incorporated by reference
    to Exhibit 10.44 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February
    10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).of this Agreement have
    been redacted in compliance with Regulation S-K Item 601(b)(10)).

10.45
 
Development
    Agreement effective December 3, 2018 by and between Mikah Pharma LLC and Elite Laboratories, Inc., incorporated by reference to Exhibit
    10.51 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of
    this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).

10.46
 
Asset
    Purchase Agreement dated November 13, 2019 by and between the Company and Nostrum Laboratories Inc., incorporated by reference to
    Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10,
    2020.

10.47
 
January
    2, 2020 Amendment to the Glenmark Pharmaceuticals Inc. USA License, Supply and Distribution Agreement, incorporated by reference
    to Exhibit 10.50 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February
    10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).

10.48
 
Asset
    Purchase Agreement executed January 16, 2020 by and between the Company and Nostrum Laboratories Inc., incorporated by reference
    to Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February
    10, 2020.

10.49
 
Employment
    Agreement with Douglas Plassche, incorporated by reference to Exhibit 10.52 to the Annual Report on Form 10-K, filed with the SEC
    on June 14, 2021.

  

71
 

 


10.50
 
Master
    Development and License Agreement for Products Between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC, effective as of June 10,
    2021.(Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10), incorporated by reference
    to the 10-Q for the period ended June 30, 2021 and filed with the SEC on August 16, 2021.

10.51
 
License
    and Distribution Agreement by and between Elite Pharmaceuticals, Inc. and Dexcel Ltd. (Or Akiva, Israel), dated December 6, 2021,
    incorporated by reference to Exhibit 10.57 to the Annual Report on Form 10-K for the period ended March 31, 2022, filed with the
    SEC on June 29, 2022.

10.52
 
February
    18, 2022 Retention Agreement with Douglas Plassche, incorporated by reference to Exhibit 10.58 to the Annual Report on Form 10-K
    for the period ended March 31, 2022, filed with the SEC on June 29, 2022.

10.53
 
Agreement
    for Sale and Purchase of Real Estate, dated April 8, 2022, by and between Clyde Wesp and Margaret Wesp as trustees of the Wesp Family
    Joint Living Trust UTD November 19, 2015 and the Company, incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
    10-Q, for the period ended June 30, 2022 and filed with the SEC on August 15, 2022.

10.54
 
Loan
    and Security Agreement, dated April 1, 2022, by and among East West Bank, Elite Pharmaceuticals, Inc. and Elite Laboratories, Inc.,
    incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q, for the period ended June 30, 2022 and filed with
    the SEC on August 15, 2022.

10.55
 
Employment
    Agreement, dated September 5, 2022, between Elite Pharmaceuticals, Inc. and Kirko Kirkov, incorporated by reference to Exhibit 10.1
    to the Current Report on Form 8-K filed with the SEC on September 7, 2022.

10.56
 
Employment
    Agreement, dated April 27, 2023, between Elite Pharmaceuticals, Inc. and Mark Pellegrino, incorporated by reference to Exhibit 10.1
    to the Current Report on Form 8-K filed with the SEC on May 3, 2023

10.57
 
Employment
    Agreement, dated September 5, 2023, between Elite Pharmaceuticals, Inc. and Carter Ward, incorporated by reference to Exhibit 10.1
    to the Current Report on Form 8-K filed with the SEC on September 7, 2023.

10.58
 

    Elite Pharmaceuticals, Inc. 2024 Equity Incentive Plan, incorporated by reference to Exhibit 99.1 to the Form S-8 filed with the SEC
    on March 28, 2024.

10.59*
 
Asset Purchase Agreement, dated June 17, 2024, by and between the Company and Nostrum Laboratories Inc.

16
 
Buchbinder Letter Dated July 17, 2023, incorporated by reference to Exhibit 16 to the Current Report on Form 8-K filed with the SEC on July 17, 2023.

21
 
Subsidiaries
    of the Company, incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K, for the period ended March 31, 2019 and
    filed with the SEC on June 21, 2019.

23.1*
 
Consent of Forvis Mazars LLP, Independent Registered Public Accounting Firm*

23.2*
 
Consent of Buchbinder Tunick & Company LLP, Independent Registered Accounting Firm

31.1*
 
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)*

32.1**
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

 
 
 

101.INS*
 
Inline XBRL
    Instance Document

 
 
 

101.SCH*
 
Inline XBRL
    Taxonomy Schema Document

 
 
 

101.CAL*
 
Inline XBRL
    Taxonomy Extension Calculation Linkbase Document

 
 
 

101.DEF*
 
Inline XBRL
    Taxonomy Extension Definition Linkbase Document

 
 
 

101.LAB*
 
Inline XBRL
    Taxonomy Extension Label Linkbase Document

 
 
 

101.PRE*
 
Inline XBRL
    Taxonomy Extension Presentation Linkbase Document

 
 
 

104*
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).

 
*
Filed herewith.
 
**
Furnished herewith.
 
ITEM
16. FORM 10-K SUMMARY
 
None.
 


72
 

 
SIGNATURES
 

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 


 
ELITE
    PHARMACEUTICALS, INC.

 
 
 

7/01/2024
By:
/s/
    Nasrat Hakim

 
 
Nasrat
                                            Hakim





 
 
Chief
    Executive Officer, President and Chairman of the

 
 
Board
    of Directors

 
 
(Principal
    Executive Officer)

 
 
 

7/01/2024
By:
/s/
    Carter Ward

 
 
Carter
                                            Ward





 
 
Chief
    Financial Officer

 
 
(Principal
    Accounting and Financial Officer)

 
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
 


Signature
 
Title
 
Date

 
 
 
 
 

/s/
    Nasrat Hakim
 
Chief
    Executive Officer, President and Chairman of the Board of Directors 
 
July 1, 2024

Nasrat
    Hakim
 
(Principal
    Executive Officer)
 
 

 
 
 
 
 

/s/
    Carter Ward
 
Chief
    Financial Officer 
 
July 1, 2024

Carter
    Ward
 
(Principal
    Accounting and Financial Officer)
 
 

 
 
 
 
 

/s/
    Barry Dash
 
Director
 
July 1, 2024

Barry
    Dash
 
 
 
 

 
 
 
 
 

/s/
    Jeffrey Whitnell
 
Director
 
July 1, 2024

Jeffrey
    Whitnell
 
 
 
 

 
 
 
 
 

/s/
    Davis Caskey
 
Director
 
July 1, 2024

Davis
    Caskey
 
 
 
 

 

73
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
CONSOLIDATED
FINANCIAL STATEMENTS
 
FOR
THE YEARS ENDED MARCH 31, 2024 AND 2023
 
TABLE
OF CONTENTS
 


 
PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM(Forvis
    Mazars, LLP , Iselin, NJ #686)
F-1

 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Buchbinder Tunick & Company #6189)
F-2

 
 

CONSOLIDATED BALANCE SHEETS
F-3

 
 

CONSOLIDATED STATEMENTS OF OPERATIONS
F-4

 
 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
F-5

 
 

CONSOLIDATED STATEMENTS OF CASH FLOWS
F-6

 
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7

 

74
 


 
Report
of Independent Registered Public Accounting Firm

 

To
the Board of Directors and
Stockholders
of Elite Pharmaceuticals, Inc.
 

Opinion
on the Consolidated Financial Statements
 
We
have audited the accompanying consolidated balance sheet of Elite Pharmaceuticals, Inc. (the “Company”) as of March 31, 2024,
and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year ended, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its
operations and its cash flows for the year ended, in conformity with accounting principles generally accepted in the United States of
America.
 
Basis
for Opinion
 
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit.
 
We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
 
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit
provide a reasonable basis for our opinion.
 
Critical
Audit Matters 
 
The
critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
 
Chargeback
Liabilities 
 
As
described in Note 1 to the financial statements, The Company generates revenue from manufacturing and licensing fees and sales of generic
pharmaceuticals bearing the Elite label to pharmaceutical distributors for pharmacies and institutions. Manufacturing fees include the
development of pain management products, manufacturing of a line of generic pharmaceutical products with approved Abbreviated New Drug
Applications (“ANDA”), through the manufacture of formulations and the development of new products. Revenues earned from
the sale of Elite label products are recorded at their net realizable value which consists of gross amounts invoiced reduced by contractual
reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable.
 
The
Company has revenue agreements with certain independent pharmaceutical wholesalers to sell and distribute their product. The Company
provides for chargebacks to wholesalers for sales to various end-customers to include, but not limited to, hospitals, group purchasing
organizations, and pharmacies. Chargebacks represent the difference between the price the wholesaler pays and the price that the end-customer
pays for a product. The company’s estimate for chargebacks is developed based upon management’s assumption of anticipated
product returns, other rebates, as well as historical information.
 
We
identified the chargeback liability as a critical audit matter. Our principal considerations for this determination is the level of subjectivity
of certain assumptions required to estimate these amounts. In particular, the accrual for chargebacks includes estimates for outstanding
claims that have occurred but for which the related claim has not yet been paid and for future claims that will be made when the wholesaler
inventory is sold to the end-customer. This required a higher degree of auditor judgment when performing audit procedures and evaluating
the results of those procedures.
 
The
primary procedures we performed to address this critical audit matter included:
 

●Obtaining
                                            an understanding of the management’s process for developing the chargeback liability,
                                            including management methods and assumptions used in the calculation;

●Tested
                                            a sample of chargeback liabilities by obtaining and inspecting source documents, including
                                            invoices and invoice credits related to the chargebacks, and customer arrangements or promotional
                                            practices, where applicable;

●Using
                                            company-generated and third-party reports, developed an independent expectation on claims
                                            that are outstanding and future claims as of the balance sheet date, and determined an expected
                                            period after the balance sheet date which such future claims would be realized;

●Assessed
                                            the relevance and reliability of the data from external sources utilized in determination
                                            of the independent expectation for chargeback liability estimate; 

●Tested
                                            the completeness and accuracy of reports obtained from management;

●Performed
                                            a retrospective review of the chargeback liability and comparing the results to management’s
                                            reserves. 
 


/s/
Forvis Mazars, LLP
 
We
have served as the Company’s auditor since 2024.
 
Iselin,
NJ
 
July
1, 2024

 


F-1
 

 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To
the Board of Directors and
 
Stockholders
of Elite Pharmaceuticals, Inc., and Subsidiary
 
Opinion
on the Financial Statements
 
We
have audited the accompanying consolidated balance sheet of Elite Pharmaceuticals, Inc. and Subsidiary (the “Company”) as
of March 31, 2023 , and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended
March 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as
of March 31, 2023 and the results of its operations and its cash flows for the year ended March 31, 2023 in conformity with accounting
principles generally accepted in the United States of America.
 
Basis
for Opinion
 
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audit provides a reasonable basis for our opinion.
 
Critical
Audit Matter
 
The
critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
 
Intangible
Assets — Refer to Note 1 to the consolidated financial statements
 
Critical
Audit Matter Description
 
As
described in Note 1 to the consolidated financial statements, the Company has capitalized costs of $6,052,189 for ANDAs and $289,039
for patents. The Company evaluates its intangible assets for impairment annually during the fourth quarter in accordance with ASC Topic
350, Intangibles, Goodwill and Other, and whenever events or circumstances change that indicate impairment may have occurred.
 
Management
performs a qualitative assessment of each intangible asset prior to performing a quantitative impairment test. Qualitative factors management
considers include, the current revenue, cost factors of raw material and labor, current cash flows, legal and regulatory factors and
industry and market considerations. If the qualitative assessment indicates the fair value is more likely than not less than the carrying
value a quantitative test is performed. Management performed a quantitative test on certain intangible assets using a discounted cash
flow methodology. The methods used to estimate the fair value of intangible assets involve significant assumptions. The significant assumptions
applied by management in estimating the fair value of intangible assets included income projections and discount rates. Due to the significant
estimates and assumptions management is required to make, we identified the fair value of intangible assets as a critical audit matter.
Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment
and an increased extent of effort.
 
How
We Addressed the Matter in Our Audit
 
The
primary procedures we performed to address this critical audit matter included:
 
We
obtained an understanding and evaluated the design and implementation of controls over the intangible valuation process. This included
management’s review over the assessment of the methodology, significant inputs and assumptions included in the fair value estimate,
as well as management’s review around the completeness, accuracy and reasonableness of the data used in this estimate.
 
Our
audit procedures assessed whether the valuation methodology used was appropriate and tested the mathematical accuracy of the valuation
model.
 
We
evaluated whether the assumptions used were reasonable by considering the historical revenue, current customer contracts, gross profit
percentage and cost of debt discount rates, and whether such assumptions were consistent with evidence obtained in other areas of the
audit.
 
/s/
Buchbinder Tunick & Company LLP
 
Buchbinder
Tunick & Company LLP
 
We have served as the Company’s auditor since 2010.
 
Little Falls, New Jersey 07424
 
July 1, 2024
 
PCAOB
ID: 6189
 


F-2
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
(AUDITED)
 



  
March
    31, 2024  
March
    31, 2023 

ASSETS 
    
   

Current
    assets: 
    
   

Cash 
$7,106,262  
$7,832,247 

Accounts
    receivable, net of allowance for expected credit losses of $236,275 and $0 respectively 
 19,453,301  
 3,094,549 

Inventory 
 12,930,464  
 9,550,716 

Prepaid
    expenses and other current assets 
 524,162  
 1,032,785 

Total
    current assets 
 40,014,189  
 21,510,297 

  
    
   

Property
    and equipment, net of accumulated depreciation of $15,906,853 and $14,586,335 respectively 
 10,175,293  
 10,426,158 

Intangible
    assets 
 6,341,228  
 6,341,228 

Finance
    lease - right-of-use asset 
 2,079,658  
 — 

Operating
    lease - right-of-use asset 
 2,355,201  
 13,062 

Deferred
    income tax asset 
 22,160,895  
 2,171,821 

Other
    assets: 
    
   

Restricted
    cash - debt service for NJEDA bonds 
 432,832  
 412,434 

Security
    deposits 
 94,240  
 21,018 

Total
    other assets 
 527,072  
 433,452 

Total
    assets 
$83,653,536  
$40,896,018 

  
    
   

LIABILITIES
    AND SHAREHOLDERS’ EQUITY 
    
   

Current liabilities: 
    
   

Accounts
    payable 
$2,714,306  
$2,446,810 

Accrued
    expenses 
 5,301,747  
 5,047,726 

Deferred
    revenue, current portion 
 13,333  
 13,333 

Bonds
    payable, current portion, net of bond issuance costs 
 115,822  
 110,822 

Loans
    payable, current portion 
 180,399  
 200,032 

Related
    party loans payable (Note 7) 
 4,000,000  
 — 

Lease
    obligation - finance lease, current portion 
 312,739  
 — 

Lease
    obligation - operating lease, current portion 
 411,418  
 14,914 

Total
    current liabilities 
 13,049,764  
 7,833,637 

  
    
   

Long-term liabilities: 
    
   

Deferred
    revenue, net of current portion 
 5,556  
 18,890 

Bonds
    payable, net of current portion and bond issuance costs 
 913,203  
 1,029,018 

Loans
    payable, net of current portion and loan costs 
 2,366,487  
 2,532,502 

Lease
    obligation - finance lease, net of current portion 
 1,480,317  
 — 

Lease
    obligation - operating lease, net of current portion 
 1,957,383  
 — 

Derivative
    financial instruments - warrants 
 6,298,008  
 521,711 

Total
    long-term liabilities 
 13,020,954  
 4,102,121 

Total
    liabilities 
 26,070,718  
 11,935,758 

  
    
   

Shareholders’ equity: 
    
   

Common Stock; par value $0.001;
    1,445,000,000 shares authorized; 1,068,373,108 and 1,014,015,081 shares issued as of March 31, 2024 and March 31, 2023, respectively;
    1,068,273,108 and 1,013,915,081 shares outstanding as of March 31, 2024 and March 31, 2023, respectively 
 1,068,377  
 1,014,019 

Additional paid-in capital 
 173,210,549  
 164,750,980 

Treasury stock; 100,000 shares
    as of March 31, 2024 and March 31, 2023, respectively, at cost 
 (306,841) 
 (306,841)

Accumulated
    deficit 
 (116,389,267) 
 (136,497,898)

Total
    shareholders’ equity 
 57,582,818  
 28,960,260 

Total
    liabilities and shareholders’ equity 
$83,653,536  
$40,896,018 

 
The
accompanying notes are an integral part of these consolidated financial statements.
 

F-3
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
(AUDITED)
 


  
2024  
2023 

  
For
    the Years Ended March 31, 

  
2024  
2023 

Revenue: 
   
  

Manufacturing
    fees 
$54,120,731  
$29,187,573 

Licensing
    fees 
 2,504,397  
 4,967,541 

Total
    revenue 
 56,625,128  
 34,155,114 

Cost
    of manufacturing 
 30,268,025  
 17,561,093 

Gross
    profit 
 26,357,103  
 16,594,021 

  
    
   

Operating expenses: 
    
   

Research
    and development 
 6,883,351  
 6,200,163 

General
    and administrative 
 7,145,114  
 5,122,272 

Impairment
    of intangible assets 
 —  
 292,807 

Non-cash
    compensation through issuance of stock options 
 159,921  
 39,325 

Depreciation
    and amortization 
 1,379,948  
 1,263,452 

Total
    operating expenses 
 15,568,334  
 12,918,019 

  
    
   

Income from operations 
 10,788,769  
 3,676,002 

  
    
   

Other (expense) income: 
    
   

Change
    in fair value of derivative financial instruments - warrants 
 (5,776,297) 
 415,126 

Change
    in fair value of stock-based liabilities 
 (5,743,468) 
 — 

Interest
    expense and amortization of debt issuance costs 
 (588,622) 
 (1,112,707)

Gain from
    settlement agreements 
 1,761,792  
 — 

Gain on
    sale of ANDA 
 —  
 1,000,000 

Interest
    income 
 20,918  
 7,453 

Other
    (expense) income, net 
 (10,325,677) 
 309,872 

  
    
   

Income before income taxes 
 463,092  
 3,985,874 

  
    
   

Income tax benefit (expense) 
 19,645,539  
 (424,028)

  
    
   

Net
    income 
$20,108,631  
$3,561,846 

  
    
   

Basic net income per share
    attributable to common shareholders 
$0.02  
$0.00 

Diluted net income per share
    attributable to common shareholders 
$0.02  
$0.00 

  
    
   

Basic weighted average Common
    Stock outstanding 
 1,015,443,363  
 1,012,911,346 

Diluted weighted average Common
    Stock outstanding 
 1,023,225,623  
 1,012,911,346 

 
The
accompanying notes are an integral part of these consolidated financial statements.
 

F-4
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
(AUDITED)
 


  
Shares  
Amount  
Shares  
Amount  
Capital  
Shares  
Amount  
Deficit  
Equity 

  
Series
    J Preferred Stock  
Common
    Stock  
Additional
    Paid-In   
Treasury
    Stock  
Accumulated  
Total Shareholders’ 

  
Shares  
Amount  
Shares  
Amount  
Capital  
Shares  
Amount  
Deficit  
Equity 

Balance
    as of March 31, 2022 
 —  
$—  
 1,011,381,988  
$1,011,385  
$164,577,227  
 100,000  
$(306,841) 
$(140,059,744) 
$25,222,027 

Net income 
 —  
 —  
 —  
 —  
 —  
 —  
 —  
 3,561,846  
 3,561,846 

Non-cash compensation through
    the issuance of employee stock options 
 —  
 —  
 —  
 —  
 39,325  
 —  
 —  
 —  
 39,325 

Shares issued in payment of
    salaries 
 —  
 —  
 1,378,608  
 1,379  
 58,621  
 —  
 —  
 —  
 60,000 

Shares
    issued in payment of consultants 
 —  
 —  
 1,254,485  
 1,255  
 75,807  
 —  
 —  
 —  
 77,062 

Balance
    as of March 31, 2023 
 —  
$—  
 1,014,015,081  
$1,014,019  
$164,750,980  
 100,000  
$(306,841) 
$(136,497,898) 
$28,960,260 

Balance 
 —  
$—  
 1,014,015,081  
$1,014,019  
$164,750,980  
 100,000  
$(306,841) 
$(136,497,898) 
$28,960,260 

Net income 
 —  
 —  
 —  
 —  
 —  
 —  
 —  
 20,108,631  
 20,108,631 

Non-cash compensation through
    the issuance of employee stock options 
 —  
 —  
 —  
 —  
 159,921  
 —  
 —  
 —  
 159,921 

Shares issued in payment of
    salaries 
 —  
 —  
 51,177,339  
 51,177  
 7,843,843  
 —  
 —  
 —  
 7,895,020 

Shares
    issued in payment of consultants 
 —  
 —  
 3,180,688  
 3,181  
 455,805  
 —  
 —  
 —  
 458,986 

Balance
    as of March 31, 2024 
 —  
$—  
 1,068,373,108  
$1,068,377  
$173,210,549  
 100,000  
$(306,841) 
$(116,389,267) 
$57,582,818 

Balance 
 —  
$—  
 1,068,373,108  
$1,068,377  
$173,210,549  
 100,000  
$(306,841) 
$(116,389,267) 
$57,582,818 

 
The
accompanying notes are an integral part of these consolidated financial statements.
 


F-5
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(AUDITED)
 


  
2024  
2023 

  
For
    the Years Ended March 31, 

  
2024  
2023 

CASH FLOWS
    FROM OPERATING ACTIVITIES: 
    
   

Net income 
$20,108,631  
$3,561,846 

Adjustments to reconcile net
    income to net cash (used in) provided by operating activities: 
    
   

Depreciation
    and amortization 
 1,320,518  
 1,277,622 

Provision for losses on accounts receivable  
 236,276  
 — 

Amortization
    of operating leases - right-of-use assets 
 151,066  
 67,061 

Impairment
    of intangible assets 
 —  
 292,807 

Non-cash
    compensation accrued 
 8,354,006  
 540,000 

Change
    in fair value of derivative financial instruments - warrants 
 5,776,297  
 (415,126)

Deferred
    income tax asset 
 (19,989,074) 
 — 

Change
    in fair value of stock-based liabilities 
 (5,743,468) 
 — 

Gain on
    settlement of Common Stock to consultant 
 (1,761,792) 
 — 

Non-cash
    compensation through the issuance of employee stock options 
 159,921  
 39,325 

Non-cash
    rent expense and lease accretion 
 —  
 803 

Deferred
    revenue 
 (13,334) 
 (13,336)

Change
    in operating assets and liabilities: 
    
   

Accounts
    receivable 
 (16,595,028) 
 (36,636)

Inventory 
 (3,379,748) 
 (2,809,546)

Prepaid
    expenses and other current assets 
 435,401  
 (435,116)

Accounts
    payable, accrued expenses and other current liabilities 
 7,780,962  
 1,336,566 

Interest
    expense of finance lease liability 
 17,126  
 — 

Lease
    obligations - operating leases 
 (139,318) 
 (67,566)

Net
    cash (used in) provided by operating activities 
 (3,281,558) 
 3,338,704 

  
    
   

CASH FLOWS
    FROM INVESTING ACTIVITIES: 
    
   

Purchase
    of property and equipment 
 (809,653) 
 (5,736,618)

Net
    cash used in investing activities 
 (809,653) 
 (5,736,618)

  
    
   

CASH FLOWS
    FROM FINANCING ACTIVITIES: 
    
   

Payment
    of bond principal 
 (125,000) 
 (115,000)

Proceeds
    from related party loans payable 
 4,000,000  
 — 

Payments
    of loans and mortgage payable 
 —  
 (12,240,111)

Proceeds
    from loans payable 
 —  
 14,438,985 

Payments
    on principal on finance lease obligations 
 (350,171) 
 — 

Amortization
    of finance leases - right-of-use assets 
 46,443  
 — 

Loan
    payments 
 (185,648) 
 (381,675)

Net
    cash provided by financing activities 
 3,385,624  
 1,702,199 

  
    
   

Net change in cash and restricted
    cash 
 (705,587) 
 (695,715)

Cash
    and restricted cash, beginning of period 
 8,244,681  
 8,940,396 

Cash
    and restricted cash, end of period 
$7,539,094  
$8,244,681 

  
    
   

Supplemental
    disclosure of cash and non-cash transactions: 
    
   

Cash paid
    for interest 
$119,412  
$1,098,537 

Cash paid
    for income taxes 
$292,000  
$424,028 

Stock
    issued in satisfaction of accrued directors salaries and consultant fees 
$8,354,006  
$137,062 

Recognition
    of right of use asset and lease liabilities entered into 
$2,592,233  
$— 

  
    
   

Reconciliation
    of cash and restricted cash 
    
   

Cash 
$7,106,262  
$7,832,247 

Restricted
    cash - debt service for NJEDA bonds 
 432,832  
 412,434 

Total
    cash and restricted cash shown in statement of cash flows 
$7,539,094  
$8,244,681 

 
The
accompanying notes are an integral part of these consolidated financial statements.
 

F-6
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Overview
 
Elite
Pharmaceuticals, Inc. (the “Company” or “Elite”) was incorporated on October 1, 1997 under the laws of the State
of Delaware, and its wholly-owned subsidiary Elite Laboratories, Inc. (“Elite Labs”) was incorporated on August 23, 1990
under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of
Nevada. Elite Labs engages primarily in researching, developing, licensing, manufacturing, and sales of generic, oral dose pharmaceuticals.
The Company is equipped to manufacture controlled-release products on a contract basis for third parties and itself, if and when the
product candidates are approved. These products include drugs that cover therapeutic areas for allergy, bariatric, attention deficit
and infection. Research and development activities are performed with an objective of developing product candidates that will secure
marketing approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting
such products.
 
Principles
of Consolidation
 
The
accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States (“GAAP”). The audited consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Elite Labs. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
Basis
of Presentation
 
The
preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires
management to make certain estimates and assumptions affecting amounts reported in our consolidated financial statements. We have identified
investment valuation, revenue recognition and the recognition of capital gains incentive fee expense as our most critical accounting
estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based
on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances.
Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting
policies and estimates follows.
 
Use
of Estimates
 
The
preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial statements, as well as reported amounts of revenues and expenses
during the reporting period. Such management estimates and assumptions include, but are not limited to, standalone selling price for
each distinct performance obligation included in customer contracts with multiple performance obligations, the period of benefit for
deferred commissions, valuation of intangible assets, the useful life of property and equipment and identifiable intangible assets, stock-based
compensation expense and income taxes. Actual results could differ from those estimates.
 
Segment
Information
 
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting, establishes
standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group,
in deciding how to allocate resources and in assessing performance.
 
The
Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results
of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance
of the Company.
 
The
Company has determined that its reportable segments are products whose marketing approvals were secured via an Abbreviated New Drug
Application (“ANDA”) and products whose marketing approvals were secured via a New Drug Application (“NDA”).
ANDA products are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals. During fiscal
year ended March 31, 2024 and 2023, the Company has paused further development of NDAs and has not engaged in business activities.
Accordingly during March 31, 2024 and 2023, results the Company has only engaged in business activities in a single operating
segment.
 
There
are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating decision
maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation
of the Company’s consolidated financial statements. Please see Note 15 for further details.
 

F-7
 

 
ELITE
                                            PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Revenue
Recognition
 
The
Company generates revenue from manufacturing and licensing fees and sales of generic pharmaceuticals bearing the Elite label to pharmaceutical
distributors for pharmacies and institutions. Manufacturing fees include the development of pain management products, manufacturing of
a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and the development of new products.
Revenues earned from the sale of Elite label products are recorded at their net realizable value which consists of gross amounts invoiced
reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable. Licensing
fees include the commercialization of products either by license and the collection of royalties, or the expansion of licensing agreements
with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations.
 
Under
ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains
control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for
those goods or services. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s)
with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance
obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration
it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined
to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that
are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the
amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is
satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.
 
Nature
of goods and services
 
The
following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature,
timing of satisfaction of performance obligations, and significant payment terms for each, as applicable:
 
a)
Manufacturing Fees
 
The
Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are
approved. These products include products using controlled-release drug technology. The Company also develops and markets (either on
its own or by license to other companies) generic and proprietary controlled-release pharmaceutical products.
 
The
Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of
the contract, at which time the performance obligation is deemed to be completed. The Company is primarily responsible for fulfilling
the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement
and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue is measured as the amount of consideration
the Company expects to receive in exchange for transferring products to a customer.
 
b)
License Fees
 
The
Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones
payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development agreements in
accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include payment to the Company
of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on
product sales.
 
If
the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative
standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone
selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable
through past transactions, the Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations.
 
The
Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated
intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular future events
(for example, payments due upon a product receiving FDA approval), the Company determined that these need to be considered for inclusion
in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method.
As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent
uncertainty of the occurrence of future events, the Company will recognize revenue from the milestone when there is not a high probability
of a reversal of revenue, which typically occurs near or upon achievement of the event.
 

F-8
 

 
ELITE
                                            PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Significant
management judgment is required to determine the level of effort required under an arrangement and the period over which the Company
expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance
obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make
such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.
 
When
determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before
or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606-10-32-18,
the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations
under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing
component as of March 31, 2024.
 
In
accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs.
 
c)
Sale of product under the Elite label
 
The
Company began direct sales of products under the Company’s own label on April 1, 2023. License agreements will remain in place
for select products. With this transition, however, a large portion of the manufacturing and license fees now reported will be replaced
with revenues from sales of Elite labeled pharmaceutical products to distributors for pharmacies and institutions.
 
The
Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms,
at which time the performance obligation is deemed to be completed. The Company is primarily responsible for fulfilling the promise to
deliver the product and bears risk of loss while the inventory is in-transit to the purchaser. Revenue is measured as the amount of consideration
earned from the sale of Elite labeled pharmaceutical products are recorded at their net realizable value which consists of gross amounts
invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable.
 
The Company provides for
chargebacks to wholesalers for sales to various end-customers to include, but not limited to, hospitals, group purchasing organizations,
and pharmacies. Chargebacks represent the difference between the price the wholesaler pays and the price that the end-customer pays for
a product. The company’s estimate for chargebacks is developed based upon management’s assumption of anticipated product returns, other
rebates, as well as historical information.
 
Disaggregation
of revenue
 
In
the following table, revenue is disaggregated by type of revenue generated by the Company. The Company recognizes revenue at a point
in time for all performance obligations. During fiscal year ended March 31, 2024 and 2023, the Company has paused further
development of NDAs and has not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has
only engaged in business activities in a single operating segment. The table also includes a reconciliation of the disaggregated
revenue with the reportable segments:
SCHEDULE
OF DISAGGREGATION OF REVENUE 


  
For
    the Years Ended March 31, 

  
2024  
2023 

NDA: 
   
  

Manufacturing fees 
$—  
$— 

Licensing
    fees 
$—  
$— 

Total
    NDA revenue 
 —  
 — 

ANDA: 
    
   

Manufacturing
    fees 
$54,120,731  
$29,187,573 

Licensing
    fees 
 2,504,397  
 4,967,541 

Total
    ANDA revenue 
 56,625,128  
 34,155,114 

Total
    revenue 
$56,625,128  
$34,155,114 

 
Selected
information on reportable segments and reconciliation of operating income by segment to income from operations before income taxes are
disclosed within Note 15.
 
Cash
 
Cash
consists of cash on deposit with banks and money market instruments. The Company places its cash with high-quality, U.S. financial institutions
and, to date has not experienced losses on any of its balances.
 
Restricted
Cash
 
As
of March 31, 2024, and March 31, 2023, the Company had $432,832 and $412,434, of restricted cash, respectively, related to debt service
reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 5).
 

F-9
 

 
ELITE
                                            PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Accounts
Receivable and Allowance for Expected Credit Losses (ASU 2016-13)
 
Accounts
receivable are comprised of balances due from customers, net of estimated allowances for expected credit losses, and other contractual
deductions, including, without limitation, chargebacks, discounts and program rebates. In determining collectability, historical trends
are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
 
The
allowance for expected credit losses is based on the probability of future collection under the current expected credited loss (“CECL”)
impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement
of Credit Losses on Financial Assets, which was adopted by the Company on April 1, 2023, as discussed below within Recently Adopted Accounting
Pronouncements. Under the CECL impairment model, the Company determines its allowance by applying a loss-rate method based on an aging
schedule using the Company’s historical loss rate. The Company also considers reasonable and supportable current information in
determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit
risk and historical loss experience. The adequacy of the allowance is evaluated on a regular basis. Account balances are written off
after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance.
Changes in the allowance are recorded as adjustments to credit losses in the period incurred.
 
Prior
to April 1, 2023, trade receivables were presented net of allowance for expected credit losses based on the credit risk of specific clients,
past collection history, and management’s evaluation of other risks. Expected credit losses stemming from unbilled receivables
expected to be billed between March 31, 2024 and March 31, 2028 include additional risk premiums estimated based on factors such as projected
inflation, projected decreases in GDP, and projected unemployment.
 
The
amendments were effective on April 1, 2023 for the Company, and must be applied using a modified retrospective approach with a cumulative-effect
adjustment through retained earnings as of the beginning of the fiscal year upon adoption as required. While the standard modifies the
measurement of the allowance for credit losses, it does not alter the credit risk of our trade or unbilled receivables.
 
The
impact of applying the CECL methodology upon adoption effective on April 1, 2023 was immaterial to the Company’s consolidated financial
statements.
 
The
Company’s quantitative allowance for credit loss estimates under CECL was determined using the loss rate method, which is impacted
by certain forecasted economic factors. In addition to the Company’s quantitative allowance for credit losses, the Company also
incorporates qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected
in quantitatively derived results, or other relevant factors to further inform the Company’s estimate of the allowance for credit
losses.
 
Additionally,
due to the expansion of the time horizon over which the Company is required to estimate future credit losses, the Company may experience
increased volatility in its future provisions for credit losses. Factors that could contribute to such volatility include, but are not
limited to, changes in the composition and credit quality of customer base, economic conditions and forecasts, the allowance for credit
loss models that are used, the data that is included in the models, the associated qualitative allowance framework, and the Company’s
estimation techniques.
 
With
the exception of an estimated allowance of $236,276 recorded in applying the CECL methodology for current estimated credit losses for
the year ended March 31, 2024, the Company has had no recordable write offs for bad debts or uncollectible invoiced amounts during the
for the year ended March 31, 2024 or the prior twelve months ended March 31, 2023.
 
Inventory
 
Inventory
is recorded at the lower of cost or net realizable value on specific identification by lot number basis.
 
Long-Lived
Assets
 
The
Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events
or changes in circumstances indicate that its carrying amounts may not be recoverable.
 
Property
and equipment are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective
assets which range from three to forty years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs
which do not improve or extend asset lives are expensed currently.
 
Upon
retirement or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting
gain or loss, if any, is recognized in income.
 

F-10
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Intangible
Assets
 
The
Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they are amortized
on a straight-line basis over the estimated useful life. Costs to acquire indefinite lived intangible assets, such as costs related to
ANDAs are capitalized accordingly.
 
The
Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change that
indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has
occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future
cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change
in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates.
 
During
the year ended March 31, 2023, the Company determined indicators of impairment occurred and recorded impairment expense of $292,807 on
its ANDAs and patents. There were no such impairments recorded during the period ended March 31, 2024. The Company notes that none of
its patents relate to any of the Company’s revenue producing activities.
 
The
following table summarizes the Company’s intangible assets as of and for the periods ended March 31, 2024 and March 31, 2023:
SCHEDULE
OF INTANGIBLE ASSETS


  
March 31, 2024

  
Estimated Useful Life 
Gross Carrying Amount  
Additions  
Impairment losses  
Accumulated Amortization  
Net Book Value 

Patent application costs 
-* 
$289,039  
$—  
$—  
$              —  
$289,039 

ANDA acquisition costs 
Indefinite 
 6,052,189  
 —  
 —  
 —  
 6,052,189 

  
  
$6,341,228  
$—  
$—  
$—  
$6,341,228 

 


  
March 31, 2023

  
Estimated Useful Life 
Gross Carrying Amount  
Additions  
Impairment losses  
Accumulated Amortization  
Net Book Value 

Patent application costs 
-* 
$465,684  
$—  
$(176,645) 
$        —  
$289,039 

ANDA acquisition costs 
Indefinite 
 6,168,351  
 —  
 (116,162) 
 —  
 6,052,189 

  
  
$6,634,035  
$—  
$(292,807) 
$—  
$6,341,228 

 

*Patent
                                            application costs were incurred in relation to the Company’s abuse deterrent opioid
                                            technology. Amortization of the patent costs will begin upon the issuance of marketing authorization
                                            by the FDA. Amortization will then be calculated on a straight-line basis through the expiry
                                            of the related patent(s).
 
Research
and Development
 
Research
and development expenditures are charged to expenses as incurred.
 
Contingencies
 
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision
for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.
If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated
financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments
about future events and can rely heavily on estimates and assumptions.
 
On
August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA
by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November
14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue
to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome
of various litigations involving Purdue or the expiry of the patents listed on the Orange Book. As of the date of filing of this Annual Report on Form 10-K, the results of
such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out
of any such matters will have a material adverse effect on its business, financial condition or results of operations.
 

F-11
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Income
Taxes
 
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce
any deferred tax assets that it determines will not be realizable in the future.
 
The
Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such
tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position.
These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
 
The
Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all
tax jurisdiction until the applicable statutes of limitation expire. As of March 31, 2024, a summary of the tax years that remain subject
to examination in our major tax jurisdictions are: United States – Federal, 2020 and forward, and State, 2019 and forward. The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and
penalties as a component of income tax expense. The
Company did not have any unrecognized tax positions for the years ended March 31, 2024 and 2023.
 
Warrants
and Preferred Shares
 
The
accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470, Debt,
ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, as applicable. Each feature of a
freestanding financial instrument including, without limitation, any rights relating to subsequent dilutive issuances, dividend issuances,
equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions, dividends and exercise is assessed
with determinations made regarding the proper classification in the Company’s financial statements.
 
Stock-Based
Compensation
 
The
Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. Under the fair value
recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized
as an expense on a straight-line basis over the requisite service period, based on the terms of the awards. The cost of the stock-based
payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless
there is a contractual term for services in which case such compensation would be amortized over the contractual term. The Company accounts
for forfeitures as they occur.
 
In
accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion
of employee’s salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”),
in lieu of cash, with the valuation of such share being calculated on a quarterly basis and equal to the average closing price of the
Company’s Common Stock. The Company records earned but unissued stock-based compensation in accrued expenses.
 
Sale
of ANDA
 
During
the year ended March 31, 2023, the Company entered into an agreement with Pyros Pharmaceuticals, Inc. (“Pyros”) pursuant
to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs) for its
generic Sabril drug (the “Sabril Product”). The Company sold its rights to Pyros for $1,000,000, which was recorded as gain
on sale of ANDA during the year ended March 31, 2023. There is no further action required by the Company regarding the rights which would
affect future periods.
 
In
conjunction with the sale of its Sabril Product to Pyros, the Company executed a Manufacturing and Supply Agreement (the “Pyros
Agreement”) with Pyros. Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the
manufacturing and packaging of Sabril over a term of three years. Revenue per the Pyros Agreement will be recognized as control of the
manufactured and supplied drugs is transferred to Pyros (at the time of delivery).
 
Earnings
Per Share Attributable to Common Shareholders’
 
The
Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”)
on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial
statements, basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding
during the period. The computation of diluted net income per share does not include the change in fair value of derivative instruments
or the conversion of securities that would have an antidilutive effect.
 
As
the average market price of Common Stock for the years ended March 31, 2024 and 2023 did not exceed the exercise price of the warrants,
the potential dilution from the warrants converting into 79,008,661 shares of Common Stock for all periods have been excluded from the
number of shares used in calculating diluted net income per share as their inclusion would have been antidilutive.
 

F-12
 

 

ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
The
following is the computation of earnings per share applicable to common shareholders for the periods indicated:
 
SCHEDULE
OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS


  
2024  
2023 

  
For the Years Ended March 31, 

  
2024  
2023 

Numerator 
    
   

Net income - basic 
$20,108,631  
$3,561,846 

Effect of dilutive instrument on net income 
 —  
 (415,126)

Net income - diluted 
$20,108,631  
$3,146,720 

  
    
   

Denominator 
    
   

Weighted average shares of Common Stock outstanding - basic 
 1,015,443,363  
 1,012,911,346 

Dilutive effect of stock options 
 7,782,260  
 — 

Weighted average shares of Common Stock outstanding - diluted 
 1,023,225,623  
 1,012,911,346 

  
    
   

Net income per share 
    
   

Basic 
$0.02  
$0.00 

Diluted 
$0.02  
$0.00 

 

As
the average market price of Common Stock for the year ended March 31, 2024 did not exceed the exercise price of the stock options, the
potential dilution from the stock options converting into 647,946 shares of Common Stock for the year ended March 31, 2024 have been
excluded from the number of shares used in calculating diluted net income per share as their inclusion would have been antidilutive.
 
Fair
Value of Financial Instruments
 
ASC
820, Fair Value Measurements and Disclosures (“ASC 820”) provides a framework for measuring fair value in accordance
with generally accepted accounting principles.
 
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs).
 
The
fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under ASC 820 are described as follows:
 

●Level
                                            1 – Unadjusted quoted prices in active markets for identical assets or liabilities
                                            that are accessible at the measurement date.

   

●Level
                                            2 – Inputs other than quoted prices included within Level 1 that are observable for
                                            the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices
                                            for similar assets or liabilities in active markets; quoted prices for identical or similar
                                            assets or liabilities in markets that are not active; inputs other than quoted prices that
                                            are observable for the asset or liability; and inputs that are derived principally from or
                                            corroborated by observable market data by correlation or other means.

   

●Level
                                            3 – Inputs that are unobservable for the asset or liability.
 

F-13
 

 

ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (AUDITED)
 
Measured
on a Recurring Basis
 
The
following table presents information about the Company’s liabilities measured at fair value on a recurring basis, aggregated by
the level in the fair value hierarchy within which those measurements fell:
 
SCHEDULE
OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS


  
 Derivative financial instruments - warrants, Fair value  
Derivative
    financial instruments - warrants, Fair value  
Derivative financial instruments - warrants, Fair value  
Derivative financial instruments - warrants, Fair value 

  
Amount at  
Fair Value Measurement Using 

  
 Fair Value  
Level 1  
Level 2  
Level 3 

March 31, 2024 
    
    
    
   

Liabilities 
    
    
    
   

Derivative financial instruments - warrants 
$6,298,008  
$—  
$—  
$6,298,008 

  
    
    
    
   

March 31, 2023 
    
    
    
   

Liabilities 
    
    
    
   

Derivative financial instruments - warrants 
$521,711  
$—  
$—  
$521,711 

 
See
Note 11 for specific inputs used in determining fair value.
 
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other
current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
Based upon current borrowing rates with similar maturities the carrying value of long-term debt, and related party loans payable approximates
fair value.
 
Non-Financial
Assets that are Measured at Fair Value on a Non-Recurring Basis
 
Non-financial
assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized. The
Company did not record an impairment charge during the year ended March 31, 2024. The Company recorded impairment of approximately $0.3
million on its ANDA and patent intangible assets during the year ended March 31, 2023.
 
Treasury
Stock
 
The
Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ equity.
 
Right-of-Use
Asset and Lease Liability
 
In
February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which modifies lease accounting
for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees
for those leases classified as operating leases and finance leases under previous accounting standards and disclosing key information
about leasing arrangements.
 
A
lessee should recognize the lease liability to make lease payments and the right-of-use asset representing its right to use the underlying
asset for the lease term. For operating leases and finance leases, a right-of-use asset and a lease liability are initially measured
at the present value of the lease payments by discount rates. The Company’s lease discount rates are generally based on its incremental
borrowing rate, as the discount rates implicit in the Company’s leases is readily determinable. Operating leases are included in
operating lease right-of-use assets and lease liabilities in the consolidated balance sheets. Finance leases are included in property
and equipment and lease liability in our consolidated balance sheets. Lease expense for operating expense payments is recognized on a
straight-line basis over the lease term. Interest and amortization expenses are recognized for finance leases on a straight-line basis
over the lease term.
 
For
the leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset
not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases
generally on a straight-line basis over the lease term.
 

F-14
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Recently
Issued Accounting Pronouncements
 
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”).
Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that
are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022
for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact
of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements.
 
In
December 2023, the FASB issued ASU 2023-09 (Topic 740), Improvements to income tax disclosures, which enhances the disclosure requirements
for the income tax rate reconciliation, domestic and foreign income taxes paid, requiring disclosure of disaggregated income taxes paid
by jurisdiction, unrecognized tax benefits, and modifies other income tax-related disclosures. The amendments are effective for annual
periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively. The Company is currently
evaluating the effect of adopting this guidance on its consolidated financial statements.
 
In
November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims
to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public
entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose
certain information about its reportable segments. Topic 280 also requires other specified segment items and amounts to be disclosed
under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a
public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine
its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal
years beginning after December 15, 2024. Early adoption is permitted. We do not expect that the requirements of ASU 2023 – 07 will
have a material impact on our consolidated financial statements.
 
Management
has evaluated recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant
impact on our consolidated financial statements and related disclosures.
 
NOTE
2. INVENTORY
 
Inventory
consisted of the following:
 
SCHEDULE
OF INVENTORY


  
March 31, 2024  
March 31, 2023 

Finished goods 
$4,465,970  
$2,352,330 

Work-in-progress 
 1,804,426  
 1,791,311 

Raw materials 
 6,660,068  
 5,407,075 

Inventory 
$12,930,464  
$9,550,716 

 
NOTE
3. PROPERTY AND EQUIPMENT, NET
 
Property
and equipment consisted of the following:
 
SCHEDULE
OF PROPERTY AND EQUIPMENT


  
March 31, 2024  
March 31, 2023 

Land, building and improvements 
$11,061,149  
$10,768,181 

Laboratory, manufacturing, warehouse and transportation equipment 
 14,090,978  
 13,364,512 

Office equipment and software 
 373,601  
 395,563 

Furniture and fixtures 
 556,418  
 484,237 

Property and equipment, gross 
 26,082,146  
 25,012,493 

Less: Accumulated depreciation 
 (15,906,853) 
 (14,586,335)

Property and equipment, net 
$10,175,293  
$10,426,158 

 
Depreciation
expense was $1,320,518 and $1,237,770 for the years ended March 31, 2024 and 2023, respectively.
 
NOTE
4. ACCRUED EXPENSES
 
Accrued
expenses consisted of the following:
 
SUMMARY
OF ACCRUED EXPENSES


  
March 31, 2024  
March 31, 2023 

Co-development profit split 
$3,684,587  
$— 

Income tax 
 485,327  
 414,989 

Employee bonuses 
 206,225  
 — 

Audit fees 
 125,000  
 125,000 

Legal and professional expense 
 90,000  
 — 

Director dues 
 22,500  
 70,000 

Consultant contract fees 
 20,000  
 193,333 

Salaries and fees payable in Common Stock  
 —  
 4,125,000 

Other accrued expenses 
 668,108  
 119,404 

Total accrued expenses 
$5,301,747  
$5,047,726 

 
 

F-15
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
NOTE
5. NJEDA BONDS
 
During
August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds (the
“NJEDA Bonds” and/or “Bonds”). During July 2014, the Company retired all outstanding Series B Notes, at par,
along with all accrued interest due and owed.
 
In
relation to the Series A Notes, the Company is required to maintain a debt service reserve. The debt service reserve is classified as
restricted cash on the accompanying consolidated balance sheets. The NJEDA Bonds require the Company to make an annual principal payment
on September 1st based on the amount specified in the loan documents and semi-annual interest payments on March 1st and September 1st,
equal to interest due on the outstanding principal. The annual interest rate on the Series A Note is 6.5%. The NJEDA Bonds are collateralized
by a first lien on the Company’s facility and equipment acquired with the proceeds of the original and refinanced bonds.
 
The
following tables summarize the Company’s bonds payable liability:
 SCHEDULE OF BONDS PAYABLE LIABILITY


  
March 31, 2024  
March 31, 2023 

Gross bonds payable 
    
   

NJEDA Bonds - Series A Notes 
$1,120,000  
$1,245,000 

Less: Current portion of bonds payable (prior to deduction of bond offering costs) 
 (130,000) 
 (125,000)

Long-term portion of bonds payable (prior to deduction of bond offering costs) 
$990,000  
$1,120,000 

  
    
   

Bond offering costs 
$354,454  
$354,454 

Less: Accumulated amortization 
 (263,479) 
 (249,294)

Bond offering costs, net 
$90,975  
$105,160 

  
    
   

Current portion of bonds payable - net of bond offering costs 
    
   

Current portions of bonds payable 
$130,000  
$125,000 

Less: Bonds offering costs to be amortized in the next 12 months 
 (14,178) 
 (14,178)

Current portion of bonds payable, net of bond offering costs 
$115,822  
$110,822 

  
    
   

Long term portion of bonds payable - net of bond offering costs 
    
   

Long term portion of bonds payable 
$990,000  
$1,120,000 

Less: Bond offering costs to be amortized subsequent to the next 12 months 
 (76,797) 
 (90,982)

Long term portion of bonds payable, net of bond offering costs 
$913,203  
$1,029,018 

 
Amortization
expense was $14,185 and $14,178 for the years ended March 31, 2024 and 2023, respectively. Interest payable was $6,067 and $6,744 as
of March 31, 2024, and 2023, respectively. Interest expense was $76,185 and $6,744 for the years ended March 31, 2024 and 2023, respectively.
 
Maturities
of bonds for the next five years are as follows:
 SCHEDULE OF MATURITIES OF BONDS


Years ending March 31, 
Amount 

2025 
$130,000 

2026 
 140,000 

2027 
 150,000 

2028 
 160,000 

2029 
 170,000 

Thereafter 
 370,000 

Total 
$1,120,000 

 
NOTE
6. LOANS PAYABLE
 
On
April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”) with East
West Bank (“EWB”). Pursuant to the EWB Loan Agreement, the Company and Elite Labs received one term loan for a principal
amount of $12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $2,000,000 (the “EWB Revolver,”
together with the “EWB Term Loan,” the “EWB Loans”). The EWB Term Loan bears interest at a rate of 9.73% (1.73%
plus the prime rate (“Prime”)) and was repayable over five years, maturing on May 1, 2027. The EWB Revolver bears interest
at a rate of (8.87% (0.87% plus Prime)) and matures on May 1, 2027. The total transaction costs associated with the EWB Term Loan incurred
as of March 31, 2023, were $40,120, which are being amortized on a monthly basis over five years, beginning in April 2022. As of March
31, 2023, the principal and interest on the EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is terminated.
 

F-16
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
On
July 1, 2022, the EWB provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $2.55 million for the purchase of the
property at 135-137 Ludlow Avenue, which was formerly a lease held by the Company. The EWB Mortgage Loan matures in 10 years and bears
interest at a rate of 4.75% fixed for 5 years then adjustable at the Wall Street Journal Prime Rate (“WSJP”) plus 0.5% with
floor rate of 4.5%. The total transaction costs associated with the EWB Mortgage Loan incurred as of March 31, 2024, were $13,251, which
are being amortized on a monthly basis over ten years, beginning in July 2022. The EWB Mortgage Loan contains customary representations,
warranties and covenants. These covenants include maintaining a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum
trailing 12-month debt coverage ratio of 1.50 to 1.00. As of the date of this filing, the Company was in compliance with each financial
covenant.
 
In
place of the EWB Term Loan, the Company has entered into a collateralized promissory note with individual lenders with rates comparable
to the EWB Term Loan but with less restrictive covenants (a “Promissory Note”). As of June 2, 2023, a Promissory Note was
placed with Nasrat Hakim, CEO and Chairman of the Board of Directors, for $3,000,000. Refer to Note 7 for information regarding The Promissory
Note.
 
Loans
payable consisted of the following:
 SCHEDULE OF LOANS PAYABLE


  
March 31, 2024  
March 31, 2023 

Mortgage loan payable 4.75% interest and maturing June 2032 
$2,418,426  
$2,472,923 

Equipment and insurance financing loans payable, between 7.10% and 12.02% interest and maturing between July 2024 and October 2025 
 128,460  
 259,611 

Less: Current portion of loans payable 
 (180,399) 
 (200,032)

Long-term portion of loans payable 
$2,366,487  
$2,532,502 

 
The
interest expense associated with the loans payable was $137,438 and $1,013,874 for the years ended March 31, 2024 and 2023, respectively.
 
Loan
principal payments for the next five years are as follows:
 SCHEDULE OF LOAN PRINCIPAL PAYMENTS


Future principal balances 
  

Years ending March 31, 
Amount 

2025 
$180,399 

2026 
 120,748 

2027 
 92,773 

2028 
 94,433 

2029 
 1,960,089 

2030 and thereafter 
 98,444 

Total remaining principal balance 
$2,546,886 

 
NOTE
7. RELATED PARTY LOANS
 
The
Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but with
fewer covenants (the “Hakim Promissory Note”). These covenants include filing timely tax returns and financial statements,
and an agreement not to sell, lease, or transfer a substantial portion of the Company’s assets during the term of the Hakim Promissory
Note. On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO and Chairman of the Board of Directors, pursuant
to which the Company borrowed funds in the aggregate principal amount of $3,000,000. The Hakim Promissory Note has an interest rate of
9% for the first year and 10% for an optional second year and the proceeds were used for working capital and other business purposes.
The original maturity date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension. The second year extension
was exercised pursuant to the terms of the Hakim Promissory Note. For the year ended March 31, 2024, interest expense on the Hakim Promissory
Note totaled and $270,000, recorded on the Consolidated Balance Sheets in accrued expenses and on the Consolidated Statements of Operations
in interest expense and amortization of debt issuance costs.
 

F-17
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
On
June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory Note”).
The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9% for the first year and 10% for an optional
second year. The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory Note. The proceeds
will be used for working capital and other business purposes. The original maturity date of the Caskey Promissory Note is June 30, 2024,
with an optional second year extension. The second year extension was exercised pursuant to the terms of the Caskey Promissory Note.
For the year ended March 31, 2024, interest expense on the Caskey Promissory Note totaled $90,000, recorded on the Consolidated Balance
Sheets in accrued expenses and on the Consolidated Statements of Operations in interest expense and amortization of debt issuance costs.
 
NOTE
8. DEFERRED REVENUE
 
Deferred
revenues in the aggregate amount of $18,889 as of March 31, 2024, were comprised of a current component of $13,333 and a long-term component
of $5,556. Deferred revenues in the aggregate amount of $32,223 as of March 31, 2023, were comprised of a current component of $13,333
and a long-term component of $18,890. These amounts represent the unamortized balance of a $200,000 advance payment received for a TAGI
Pharma licensing agreement with a fifteen-year term beginning in September 2010 and ending in August 2025. These advance payments were
recorded as deferred revenue when received and are earned, on a straight-line basis over the life of the licenses. The current component
is equal to the amount of revenue to be earned during the 12-month period immediately subsequent to the balance sheet date and the long-term
component is equal to the amount of revenue to be earned thereafter.
 
NOTE
9. COMMITMENTS AND CONTINGENCIES
 
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision
for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.
If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated
financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments
about future events and can rely heavily on estimates and assumptions.
 
On
August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA
by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November
14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue
to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome
of various litigations involving Purdue or the expiry of the patents listed on the Orange Book. As of March 31, 2024, the results of
such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out
of any such matters will have a material adverse effect on its business, financial condition or results of operations.
 
Operating
Leases
 
The
Company entered into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey (the
“Ludlow Ave. lease”) which began in 2010. On June 30, 2021, the Company exercised a renewal option, with such option including
a term that begins on January 1, 2022 and expires on December 31, 2026. The Ludlow Ave. lease was terminated on July 1, 2022, when the
Company purchased the underlying property.
 
In
October 2020, the Company entered into an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”).
The Pompano Office Lease is for approximately 1,275 square feet of office space, with the Company taking occupancy on November 1, 2020.
The Pompano Office Lease had a term of three years, ending on October 31, 2023. The Pompano Office Lease was extended for one additional
year to October 31, 2024.
 
The
Company entered into a lease agreement for a portion of a one-story warehouse, located at 144 Ludlow Avenue, Northvale, New Jersey (the
“144 Ludlow Ave. lease”). The lease agreement began on January 22, 2024, and has a term of five years. The 144 Ludlow Ave.
lease will expire on December 31, 2028.
 
The
Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain
a lease that is accounted for separately, the Company determines the classification and initial measurement of the right-of-use asset
and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company
has elected to account for non-lease components associated with its leases and lease components as a single lease component.
 
The
Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and
a lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term.
The present value of the lease payments is calculated using either the implicit interest rate in the lease or an incremental borrowing
rate.
 

F-18
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
Finance
Leases
 
In
November 2023, the Company entered into a finance lease for equipment (the “Waters Equipment Lease”). The Waters Equipment
Lease is related to lab equipment with an acquisition cost of $499,775, with the Company taking ownership of the asset on December 1,
2023. The Waters equipment lease has a term of five years, ending on November 29, 2028. The Company also has the option to purchase the
asset at the end of the lease term for the amount of $1, which is probable to be exercised.
 
In
February 2024, the Company entered into a finance lease for warehouse equipment (the “Warehouse Equipment Lease”). The Warehouse
Equipment Lease is related to warehouse equipment with an acquisition cost of $37,500, with the Company taking ownership of the asset
during February 2024. The Warehouse Equipment Lease has a term of two years, ending in February 2026. The Company also has the option
to purchase the asset at the end of the lease term for the amount of $1, which is probable to be exercised.
 
In
February 2024, the Company entered into a finance lease for equipment ( the “February 2024 Equipment Lease”). The
February 2024 Equipment Lease is related to manufacturing equipment with an acquisition cost of $455,000,
with the Company taking ownership of the asset during February 2024. The
February 2024 Equipment Lease has a term of five years, ending in February 2029. The Company retains ownership of the
equipment at lease termination.
 
In
March 2024, the Company entered into three separate finance leases for manufacturing assets (the “March 2024 Equipment Leases”).
The March 2024 Equipment Leases are related to manufacturing equipment and vault installed at the Company’s facility located at
144 Ludlow Avenue, Northvale NJ with an aggregate acquisition cost of $1.1 million. Each of the separate leases included in the March
2024 Equipment Leases have a term of five years, ending in March 2029. The Company retains ownership of all related assets at lease termination.
 
A
lease is classified as a finance lease if any of the following criteria are met: (i) ownership of the underlying asset transfers to the
Company by the end of the lease term; (ii) the lease contains an option to purchase the underlying asset that the Company is reasonably
expected to exercise; (iii) the lease term is for a major part of the remaining economic life of the underlying asset; (iv) the present
value of the sum of lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value
of the underlying asset; or (v) the underlying asset is of a specialized nature that it is expected to have no alternative use to the
lessor at the end of the lease term. A lease that does not meet any of the criteria to be classified as a finance lease is classified
as an operating lease. As the Company expects to exercise the option to purchase the asset at the end of the lease term, the Waters equipment
lease was determined to be a finance lease. The finance lease is included on the balance sheets as Finance lease - right-of-use asset
and Lease obligation - finance lease. The finance lease costs are split between Depreciation and amortization expense related to the
asset and Interest expense and amortization of debt issuance costs on the lease liability, using the effective rate charged by the lessor.
The Company has elected to account for lease and non-lease components separately.
 


Lease
assets and liabilities are classified as follows on the consolidated balance sheet:
 SCHEDULE OF LEASE ASSETS AND LIABILITIES


  
  
For the Years Ended March 31, 

Lease 
Classification 
2024  
2023 

Assets 
  
    
   

Finance 
Finance lease – right-of-use asset 
$2,079,658  
$— 

Operating 
Operating lease – right-of-use asset 
 2,355,201  
 13,062 

Total leased assets 
  
$4,434,859  
$13,062 

  
  
    
   

Liabilities 
  
    
   

Current 
  
    
   

Finance 
Lease obligation – finance lease 
$312,739  
$— 

Operating 
Lease obligation – operating lease 
 411,418  
 14,914 

  
  
    
   

Long-term 
  
    
   

Finance 
Lease obligation – finance lease, net of current portion 
 1,480,317  
 — 

Operating 
Lease obligation – operating lease, net of current portion 
 1,957,383  
 — 

Total lease liabilities 
  
$4,161,857  
$14,914 

 
Rent
expense is recorded on the straight-line basis. Rent expense under the 135 Ludlow Ave. terminated lease was $0
and $58,248 for the years
ended March 31, 2024 and 2023, respectively. Rent expense under the Pompano Office Lease was $28,690
and $25,635
for the years ended March 31, 2024 and 2023, respectively. Rent expense under the 144 Ludlow lease was $151,515
and $0
for the years ended March 31, 2024 and 2023. Rent expense is recorded in general and administrative expense in the consolidated
statements of operations.
 

F-19
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
The
table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under the Pompano Office Lease and
Waters Equipment Lease:
 SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS


Years ending March 31, 
Operating Lease Amount  
Financing Lease Amount  
Total 

2025 
$629,280  
$463,734  
$1,093,014 

2026 
 623,565  
 468,391  
 1,091,956 

2027 
 637,050  
 449,745  
 1,086,795 

2028 
 650,871  
 449,745  
 1,100,616 

2029 
 440,159  
 408,453  
 848,612 

Thereafter 
 —  
 6,337  
 6,337 

Less: interest 
 (612,118) 
 (453,355) 
 (1,065,473)

Present value of lease payments 
$2,368,807  
$1,793,050  
$4,161,857 

 
The
weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:
 SCHEDULE OF WEIGHTED -AVERAGE REMAINING TERM AND THE WEIGHTED-AVERAGE DISCOUNT RATE


  
For the Years Ended March 31, 

Lease Term and Discount Rate 
2024  
2023 

Remaining lease term (years) 
    
   

Operating leases 
 4.7  
 0.6 

Finance leases 
 4.8  
 — 

Discount rate 
    
   

Operating leases 
 10.0% 
 6.0%

Finance leases 
 9.5% 
 — 

 
NOTE
10. PREFERRED STOCK
 
Series
J convertible preferred stock
 
On
April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the
Certificate of Designations. A total of 50 shares of Series J Preferred were authorized, zero shares are issued and outstanding, with
a stated value of $1,000,000 per share and a par value of $0.01.
 
NOTE
11. DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS
 
The
Company evaluates and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments
and Hedging Activities.
 
The
Company issued warrants, with a term of ten years, to affiliates in connection with an exchange agreement dated April 28, 2017, as further
described in this note below.
 
The
Company has 79,008,661 total warrants to purchase shares of Common Stock outstanding with a weighted average exercise price of $0.1521
as of March 31, 2024 and March 31, 2023.
 
On
April 28, 2017, the Company entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive
Officer of the Company, pursuant to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase
an aggregate of 79,008,661 shares of its Common Stock (the “Series J Warrants” and, along with the Series J Preferred issued
to Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Hakim. The fair value of the Series
J Warrants was determined to be $6,474,674 upon issuance at April 28, 2017.
 
The
Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing April 28, 2020. The initial exercise
price is $0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis, including a provision within that
provides the holder a choice of net cash settlement or settlement in shares upon a cashless exercise. The net cash settlement amount
is the cash value obtained by subtracting the then exercise price from the closing price of the Company’s Common Stock (provided
such closing price is higher than the exercise price) and multiplying the difference by the number of shares exercised. As this event
is at the holder’s option, it is considered outside of the Company’s control. As a result of the net cash settlement at the
option of the holder, such warrants are classified as liabilities and measured initially and subsequently at fair value.
 

F-20
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
The
exercise price is subject to adjustment for any issuances or deemed issuances of Common Stock or Common Stock equivalents at an effective
price below the then exercise price. The Series J Warrants also provide for other standard adjustments upon the happening of certain
customary events.
 
The
fair value of the Series J Warrants was calculated using a Black-Scholes model. The following assumptions were used in the Black-Scholes
model to calculate the fair value of the Series J Warrants:
 SCHEDULE OF FAIR VALUE OF WARRANTS ISSUED


  
March 31, 2024  
March 31, 2023 

Fair value of the Company’s Common Stock 
$0.1543  
$0.0290 

Volatility 
 72.90% 
 74.37%

Initial exercise price 
$0.1521  
$0.1521 

Warrant term (in years) 
 3.1  
 4.1 

Risk free rate 
 4.40% 
 3.55%

 
The
changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis were as follows:
 SCHEDULE OF CHANGES IN WARRANTS MEASURED AT FAIR VALUE ON A RECURRING BASIS


Balance at March 31, 2022 
$936,837 

Change in fair value of derivative financial instruments - warrants 
 (415,126)

Balance at March 31, 2023 
$521,711 

Change in fair value of derivative financial instruments - warrants 
 5,776,297 

Balance at March 31, 2024 
$6,298,008 

 
NOTE
12. SHAREHOLDERS’ EQUITY
 
Lincoln
Park Capital Transaction - July 8, 2020 Purchase Agreement
 
On
July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights
agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase
up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC
Purchase Agreement, at the Company’s direction.
 
The
Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the years ended March 31, 2024
and 2023. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Purchase
Agreement. The 2020 LPC Purchase Agreement expired on August 1, 2023.
 
Summary
of Common Stock Activity
 
On
November 22, 2023, the Company issued 1,642,971 shares of Common Stock in payment of director fees to be paid via the issuance of common
stock, with such shares having an aggregate value on the date of original accrual of $60,000 and which were owed for periods prior to
the current fiscal year and accrued as of the date of share issuance. The price of the Company’s Common Stock on November 22, 2023,
was $0.1533 per share. The aggregate value of the shares on the date of their issuance was $251,867.
 
On
December 29, 2023, the Company issued 2,223,147 shares of Common Stock in payment of consultant fees to be paid via the issuance of common
stock, with such shares having an aggregate value on the date of original accrual of $153,333 and which were owed for periods prior to
the current fiscal year and accrued as of the date of share issuance. The price of the Company’s Common Stock on December 29, 2023,
was $0.14 per share. The aggregate value of the shares on the date of their issuance was $311,238.
 
On
March 29, 2024, the Company issued 957,541 shares of Common Stock in payment of consultant fees to be paid via the issuance of common
stock, with such shares having an aggregate value on the date of original accrual of $33,998. The price of the Company’s Common
Stock on March 29, 2024, was $0.1543 per share. The aggregate value of the shares on the date of their issuance was $147,749.
 
On
March 29, 2024, the Company issued 49,534,368 shares of Common Stock in payment of salaries, with such shares having an aggregate value
on the date of original accrual of $3,125,000. The price of the Company’s Common Stock on March 29, 2024, was $0.1543 per share.
The aggregate value of the shares on the date of their issuance was $7,643,153.
 
As
of March 31, 2024, there were 1,068,373,108 shares of Common Stock issued and 1,068,273,108 shares of Common Stock outstanding.
 

F-21
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
As
of March 31, 2023, there were 1,014,015,081 shares of Common Stock issued and 1,013,915,081 shares of Common Stock outstanding.
 
During
the years ended March 31, 2024 and 2023, the Company issued 54,358,027 and 2,633,093 shares of Common Stock, respectively, with such
issuances of Common Stock being summarized as follows:
 
SCHEDULE OF COMMON STOCK ACTIVITY 


  
2024  
2023 

  
March 31, 

  
2024  
2023 

Common Stock issued as of March 31, 2023 and 2022, respectively 
 1,014,015,081  
 1,011,381,988 

  
    
   

Common Stock issued in payment of Directors fees, salaries and consulting fees 
 54,358,027  
 2,633,093 

Common Stock issued during the fiscal year 
 54,358,027  
 2,633,093 

  
    
   

Common Stock issued as of March 31, 2024 and 2023, respectively 
 1,068,373,108  
 1,014,015,081 

 
NOTE
13. STOCK-BASED COMPENSATION
 
Part
of the compensation paid by the Company to its Directors and employees consists of the issuance of Common Stock or via the granting of
options to purchase Common Stock.
 
Stock-based
Director Compensation
 
The
Company’s Director compensation policy, instituted in October 2009 and further revised in January 2016, includes provisions that
prior to April 1, 2023, a portion of director’s fees are to be paid via the issuance of shares of the Company’s Common Stock,
in lieu of cash, with the valuation of such shares being calculated on quarterly basis and equal to the average closing price of the
Company’s Common Stock. Beginning on April 1, 2023, all Directors fees are paid in cash.
 
During
the year ended March 31, 2024, the Company accrued director’s fees totaling $90,000, which was paid in cash payments totaling $67,500
during the fiscal year ended March 31, 2024 and a cash payment in April 2024 for the balance of $22,500.
 
Prior
to the fiscal year ended March 31, 2024, the Directors had earned and were owed Directors fees accrued during the prior fiscal year,
with such accrued Directors fees totaling 1,642,971 shares of Common Stock and cash amounts totaling $30,000. Both of these amounts were
paid to the Directors during November 2023 via the issuance of a total of 1,642,971 shares of Common Stock to the Directors and cash
payments totaling $30,000 being made to the Directors.
 SCHEDULE OF STOCK BASED COMPENSATION


Balance of common stock owed at April 1, 2023 
$60,000 

Awarded shares 
 — 

Change in fair value of stock-based liabilities 
 191,867 

Issuance of common stock on November 22, 2023 
 (251,867)

Balance of common stock owed at March 31, 2024 
$— 

 
Stock-based
Employee/Consultant Compensation
 
Employment
contracts with the Company’s President and Chief Executive Officer and certain other employees and engagement contracts with certain
consultants include provisions for a portion of each employee’s salaries or consultant’s fees to be paid via the issuance
of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on a quarterly basis
and equal to the average closing price of the Company’s Common Stock.
 SCHEDULE OF STOCK BASED COMPENSATION


Balance of common stock owed at April 1, 2023 
$4,278,333 

Awarded shares 
 — 

Change in fair value of stock-based liabilities 
 5,551,601 

Common stock issued 
 (8,068,142)

Settlement of non-cash liability 
 (1,761,792)

Balance of common stock owed at March 31, 2024 
$— 

 
During
the year ended March 31, 2024, the Company accrued no additional salaries owed to the Company’s President, Chief Executive Officer
and certain other employees which will be paid via the issuance of shares of Common Stock. On March 29, 2024 the Company paid off its
balance of accrued salaries to the president through the issuance of 49,534,368 shares of common stock.
 

F-22
 

 

ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
On
November 6, 2023, the Company entered into a Settlement Agreement with a former executive who was terminated on February 7, 2022. The
employment agreement with the former executive included annual compensation of $250,000 which was to be paid via the issuance of shares
of Common Stock. At the date of the former executive’s termination an aggregate of 14,892,580 shares of Common Stock (the “Deferred
Shares”) were due to the former executive, with such number of shares representing an aggregate of $1,000,000 in compensation earned
pursuant to the relevant employment agreement at an annual rate of $250,000. Pursuant to the Settlement Agreement, the former executive
irrevocably elected to relinquish all rights and claims to the Deferred Shares. The Company is released of any obligation to issue the
Deferred Shares and further acknowledges that no Deferred Shares will be issued to or received by the former employee. The price of the
Company’s Common Stock on November 6, 2023 was $0.1183 per share and the value of the Deferred Shares on this date was $1,761,792.
The Company recorded other income from gain on settlement agreement for this amount on the Consolidated Statements of Operations.
 
On
December 29, 2023, the Company issued 2,223,147 shares of Common Stock in satisfaction of accrued consultant fees.
 
On
March 29, 2024 the Company issued 957,541 shares of Common Stock in satisfaction of accrued consultant fees.
 
Options
 
Under
its 2014 Equity Incentive Plan and its 2024 Equity Incentive Plan, the Company did grant and may grant stock
options to officers, selected employees, as well as members of the Board of Directors and advisory board members. All options have
generally been granted at a price equal to or greater than the fair market value of the Company’s Common Stock at the date of
the grant. Generally, options are granted with a vesting period of up to three years and expire ten years from the date of
grant.
 
The
fair value of option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The exercise price of each
award is generally not less than the per share fair value in effect as of that award date. The determination of fair value using the
Black-Scholes model is affected by the Company’s share fair value as well as assumptions regarding a number of complex and subjective
variables, including expected price volatility, risk-free interest rate and projected employee share option exercise behaviors. The Company
estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry.
The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method
for awards, since the Company does not have sufficient exercise history to estimate term of its historical option awards. The risk-free
interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the
Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
 
The
grant date fair value of option awards is determined using the Black Scholes option-pricing model. The following assumptions were used
for the year ended March 31, 2024 and year ended March 31, 2023:
SCHEDULE OF GRANT DATE FAIR VALUE OF OPTION AWARDS 


  
March 31, 2024  
March 31, 2023 

Term (in years) 
 10  
 10 

Exercise Price 
 $0.08-$0.16  
 $0.03-$0.04 

Dividend Yield 
 —  
 — 

Expected Volatility 
 80%-81%  
 79%-80% 

Risk Free Rate 
 4.27%-4.69%  
 2.99%-4.01% 

 
A
summary of the activity of Company’s 2024 Equity Incentive plan and prior equity incentive plans for the year ended March 31, 2024 is as follows:
 SCHEDULE OF STOCK OPTION PLAN


  
Shares
Underlying Options  
Weighted
Average
Exercise Price  
Weighted Average
Remaining Contractual
Term (in years)  
Aggregate Intrinsic Value 

Outstanding at March 31, 2023 
 15,370,000  
$0.07  
 7.4  
$— 

Granted 
 4,400,000  
$0.09  
 —  
$— 

Expired and Forfeited 
 (4,040,000) 
$0.07  
 —  
$— 

Outstanding at March 31, 2024 
 15,730,000  
$0.05  
 8.8  
$1,626,748 

Exercisable at March 31, 2024 
 343,334  
$0.18  
 4.3  
$8,757 

 
The
aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying awards
and the quoted price of the Company’s Common Stock as of March 31, 2024 of $0.15 for those awards with strike prices lower than
the quoted price of the Company’s Common Stock as of March 31, 2024. As of March 31, 2024, there was $437,921 in unrecognized stock
based compensation expense that will be recognized over a weighted average 2.43 year period.
 
On
September 5, 2023, options were granted to the Chief Financial Officer pursuant to the 2014 Plan to purchase an aggregate of 3,000,000
shares of Common Stock. The options have an exercise price of $0.0898 per share, the fair market value of the Common Stock on the date
of grant. The options granted will vest one third for each of the next three years upon the anniversary date of the grant and have a
ten-year expiration date.
 

F-23
 

 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
On
September 19, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 1,000,000 shares of Common
Stock. The options have an exercise price of $0.0819 per share, the fair market value of the Common Stock on the date of grant. The options
granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.
 
On
October 2, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 100,000 shares of Common
Stock. The options have an exercise price of $0.0938 per share, the fair market value of the Common Stock on the date of grant. The options
granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.
 
On
November 11, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 300,000 shares of Common
Stock. The options have an exercise price of $0.1578 per share, the fair market value of the Common Stock on the date of grant. The options
granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.
 
The
weighted-average grant-date fair value of stock options granted during the year ended March 31, 2024 under the 2014 Plan was $0.0927.
 
NOTE
14. CONCENTRATIONS AND CREDIT RISK
 
Revenues
 
Three
customers accounted for approximately 67% of the Company’s revenues for the year ended March 31, 2024. These three customers accounted
for approximately 32%, 27%, and 8% of revenues each, respectively.
 
Two
customers accounted for approximately 96% of the Company’s revenues for the year ended March 31, 2023. These two customers accounted
for approximately 85% and 11% of revenue each, respectively.
 
Accounts
Receivable
 
Two
customers accounted for approximately 80% of the Company’s accounts receivable as of March 31, 2024. These two customers accounted
for approximately 49% and 31% of accounts receivable each, respectively.
 
One
customer accounted for approximately 96% of the Company’s accounts receivable as of March 31, 2023.
 
Purchasing
 
Two
suppliers accounted for approximately 62% of the Company’s purchases of raw materials for the year ended March 31, 2024. These
two customers accounted for approximately 49%, and 13%, of purchasing each, respectively.
 
One
supplier accounted for approximately 34% of the Company’s purchases of raw materials for the year ended March 31, 2023.
 
NOTE
15. SEGMENT RESULTS
 
FASB
ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on
the way a company’s management organized segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which
management disaggregates a company.
 
The
Company has historically determined that its reportable segments are ANDAs for generic products and NDAs for branded products. The
Company identified its reporting segments based on the marketing authorization relating to each and the financial information used
by its chief operating decision maker to make decisions regarding the allocation of resources to and the financial performance of
the reporting segments. During fiscal year ended March 31, 2024 and 2023, the Company has paused further development of NDAs and has
not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has only engaged in business
activities in a single operating segment.
 
Asset
information by operating segment is not presented below since the chief operating decision maker does not review this information by
segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial
statements.
 

F-24
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
The
following represents selected information for the Company’s reportable segments:
 SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS


  
2024  
2023 

  
For the Years Ended March 31, 

  
2024  
2023 

Operating Income by Segment 
    
   

ANDA 
$19,473,752  
$10,393,857 

Operating income by Segment 
$19,473,752  
$10,393,857 

 
The
Company notes that there was no revenue related to the NDA segment for the years ended March 31, 2024 and 2023.
 
The
table below reconciles the Company’s operating income by segment to income before income taxes as reported in the Company’s
consolidated statements of operations:
 SCHEDULE OF OPERATING INCOME BY SEGMENT TO INCOME FROM OPERATIONS


  
2024  
2023 

  
For the Years Ended March 31, 

  
2024  
2023 

Operating income by segment 
$19,473,752  
$10,393,857 

Corporate unallocated costs 
 (7,145,114) 
 (3,581,468)

Interest income 
 20,918  
 7,453 

Interest expense and amortization of debt issuance costs 
 (588,622) 
 (1,112,707)

Impairment of intangible assets 
 —  
 (292,807)

Depreciation and amortization expense 
 (1,379,948) 
 (1,263,452)

Significant non-cash items 
 1,601,871  
 (580,128)

Change in fair value of derivative instruments 
 (5,776,297) 
 415,126 

Change in fair value of stock-based liabilities 
 (5,743,468) 
 — 

Income before income taxes 
$463,092  
$3,985,874 

 
NOTE
16. RELATED PARTY AGREEMENTS
 
Mikah
Pharma, LLC Agreements
 
In
May 2020, Praxgen (formerly known as SunGen Pharma LLC), pursuant to an asset purchase agreement, assigned its rights and obligations
under the Praxgen Agreement for Amphetamine IR and Amphetamine ER to Mikah Pharma LLC (“Mikah”). The ANDAs for Amphetamine
IR and Amphetamine ER are now registered under Elite’s name. Mikah will now be Elite’s partner with respect to Amphetamine
IR and ER and will assume all the rights and obligations for these products from Praxgen. Mikah was founded in 2009 by Nasrat Hakim,
a related party and the Company’s President, Chief Executive Officer and Chairman of the Board.
 
In
June 2021, the Company entered into a development and license agreement with Mikah, pursuant to which Mikah will engage in the research,
development, sales and licensing of generic pharmaceutical products. In addition, Mikah will collaborate to develop and commercialize
generic products including formulation development, analytical method development, manufacturing, sales and marketing of generic products.
Initially two generic products were identified for the parties to develop.
 
As
of March 31, 2024, the Company owes an aggregate of $3,389,949 to Mikah in accordance with the agreements, with such amount being recorded
as an accrued expense on the consolidated balance sheets.
 
Consultants
Agreements
 
Employment
contracts with certain consultants include provisions for a portion of the consultant’s fees to be paid via the issuance of shares
of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on a quarterly basis and equal
to the average closing price of the Company’s Common Stock. On December 29, 2023, the Company issued 2,223,147 shares of Common
Stock in satisfaction of accrued consultant fees owed to one consultant.
 

F-25
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
NOTE
17. INCOME TAXES
 
The
income before income taxes for the year ended March 31, 2024 and 2023 were $0.5 million and $4.0 million, respectively.
 
Components
of the provision for income taxes were (amounts in thousands):
  SCHEDULE OF PROVISION FOR INCOME TAXES


For the Year Ended March 31 (in thousands) 
2024  
2023 

Current provision (benefit): 
    
   

Federal 
$—  
$— 

State and local 
 343  
 424 

Total current provision 
 343  
 424 

  
    
   

Deferred provision (benefit): 
    
   

Federal 
 (19,708) 
 — 

State and local 
 (281) 
 — 

Total deferred provision (benefit) 
 (19,989) 
 — 

  
    
   

Provision for income taxes 
$(19,646) 
$424 

 
Reconciliation
of the federal statutory rate to the Company’s effective tax rate were:
 
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION



For the Year Ended March 31 (in thousands) 
2024  
2023 

Federal income tax rate 
$99   
$837  

State and local taxes, net of federal benefit 
 (10) 
 424 

Non-deductible change in fair value of derivative financial instruments 
 1,213  
 — 

Non-deductible change in fair value of stock-based liabilities 
 949  
 — 

Other permanent items 
 11  
 — 

Prior year deferred true-up 
 (1,659) 
   

Tax credits 
 (240)  
 — 

Change in valuation allowance 
 (20,010)  
 (837) 

Effective tax rate 
$(19,646)  
$424 

 


F-26
 


 
ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 

The
major components of deferred tax assets and liabilities as of March 31, 2024 and 2023 are as follows (amounts in thousands of dollars):
  SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES


As of March 31 (in thousands) 
2024  
2023 

Deferred tax assets: 
    
   

 Lease Liability 
$1,034  
$— 

Fixed Assets 
 137  
 — 

Sec. 174 R&E Capitalization 
 2,298  
 — 

Allowance for Expected Credit Losses 
 59  
 — 

Net Operating Loss 
 15,533  
 17,613 

R&D Credit 
 5,232  
 4,993 

Deferred tax assets 
 24,293  
 22,606 

Valuation Allowance 
 —  
 (20,434)

Net deferred tax asset 
 24,293  
 2,172 

  
    
   

Deferred tax liabilities: 
    
   

Right of Use Asset 
 (1,102) 
 — 

Intangible Assets 
 (1,030) 
 — 

Deferred tax liabilities 
 (2,132) 
 — 

  
    
   

Net deferred tax asset 
$22,161  
$2,172 

 
The
Company’s income tax benefit was $19.6 million and $0.4 million for the year ended March 31, 2024 and March 31, 2023, respectively.
During the year ended March 31, 2024, the Company recorded a tax benefit of $21.9 million related to the Company’s release
of the valuation allowance against deferred tax assets related to U.S. federal net operating losses carryforwards and research and development
tax credits, which are expected to be realized based on demonstrated current profitability and its expectations of forecasted income.
 
As
of March 31, 2024, the Company has a federal net operating loss carry forward of $74.0
million, of which, $51.6
million are subject to expire at various dates
between 2028 and 2037 and $22.4
million can be carried forward indefinitely with limitation of 80% of taxable income. The
Company was able to release the entirety of its valuation allowance on its net deferred tax asset as it determined future taxable profits
will offset all future tax attributes. During 2024, the Company recorded a tax benefit of $21.9
million as a result of this change in judgment.
As of March 31, 2024, the Company’s federal and state income taxes due were zero and less than $0.5
million, respectively.
 
The
Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and
penalties as a component of income tax expense. There were no amounts accrued for interest or penalties for the
year ended March 31, 2024. Management does not expect any material changes in its unrecognized tax benefits in the next year.
 


F-27
 


 

ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AUDITED)
 
There
are currently no federal or state income tax examinations underway. The Company’s federal tax returns are open to examination from
2020 and its state tax returns are open to examination from 2019.
 
NOTE
18. SUBSEQUENT EVENTS
 
Approval
for generic Methotrexate
 
On
May 10, 2024, the Company received approval from the FDA for an ANDA for generic Methotrexate Sodium 2.5 mg tablets. Methotrexate belongs
to a class of drugs known as antimetabolites and will be sold under the Elite Laboratories, Inc. label. 
 
Asset
Purchase Agreement with Nostrum Laboratories
 
On June 17, 2024, the Company and Nostrum Laboratories Inc. (“Nostrum”) entered into an Asset Purchase Agreement (the “Asset
Purchase Agreement”), pursuant to which Nostrum was obligated to (i) sell to the Company all of its rights in and to the approved
abbreviated new drug applications (ANDAs) for generic Norco® (Hydrocodone Bitartrate and Acetaminophen tablets, USP CII), generic
Percocet® (Oxycodone Hydrochloride and Acetaminophen, USP CII), and generic Dolophine® (Methadone Hydrochloride tablets), each
a “Product”, and (ii) grant to the Company a royalty-free, non-exclusive perpetual license to use the manufacturing technology,
proprietary information, processes, techniques, protocols, methods, know-how, and improvements necessary or used to manufacture each Product
in accordance with the applicable ANDA, in exchange for $900,000 in cash (the “Transaction”). The Asset Purchase Agreement
includes customary representations and warranties and various customary covenants. The closing of the Transaction occurred on June 21,
2024.
 

F-28

 



